The fallout from the White House’s deficit reduction task force, which is studying ways to reduce the nation’s massive debt burden, shows no signs of disappearing.
One trial balloon that’s been floating around as a way to increase revenue is the elimination of the home mortgage tax deduction. That’s a balloon that should be popped, and fast, say mortgage industry observers.
The task force, which will vote this week on the 18-member board’s recommendations to cut the $14 trillion national budget deficit, has been both praised and criticized for touching one of the consumer economy’s most treasured tax benefits – the home mortgage deduction.
While the task force isn’t calling for a complete elimination of the home mortgage deduction, it is calling to shut down the tax deduction for mortgages on second homes, on home equity loans, and for mortgages of more than $500,000.
Critics of the action include a veritable “who’s who” of mortgage industry heavyweights, along with some prominent American economists. Here are some of the most outspoken:
National Association of Home Builders Chair, Bob Jones, says “Tampering with the deduction would be a major setback for today’s slowly emerging housing recovery. It would disrupt the plans of young households who are gathering their financial resources to purchase a home. And it would impose a substantial tax burden on existing homebuyers, many of whom continue to stay current with their mortgage payments even as they struggle to make ends meet. Diminishing or ending the deduction would (also) exert further downward pressure on home prices, leaving more home owners with mortgages larger than the value of their property and fueling even more foreclosures.”