The NAR is warning that any changes to mortgage interest deductions could threaten recent signs of stability within the housing market, eroding prices and values, and hurting economic growth.
The Chief Economist of the National Association of Realtors®, Lawrence Yun, spoke at a recent forum entitled ‘Rethinking the Mortgage Interest Deduction,’ which was hosted by the Tax Policy Center, and was the joint-venture of the Reasoned Foundation and the Urban Institute and Brookings Institute. Yun, who was on the panel of experts debating the future of the MID, contended that it’s the worst possible time for discussions on changing the tax laws, and that it could impair the real estate and jobs market recovery.
Yun said “One thing that is indisputable is that eliminating the MID will lower the homeownership rate in the US. While we must ensure that the conditions that led to the artificially inflated home ownership rate of the bubble years do not resurface, we also need to create the conditions for sustainable homeownership.”
The subject sparked a lively debate during the forum, with Yun challenging recent calls for changes to the tax code. He feels that saying the MID was part of the reason for the housing market bubble, and that it is contributing to the deficit problem is an invalid argument as it has been part of the federal tax code for over 100 years. He points out that homeowners already pay 80% to 90% of US federal income tax, and that if this tax break is eliminated this could rise to 95%.
His view is that removing MID would increase the taxation of the middle classes, and he refutes the view that only the wealthy benefit, as the reality is that the majority of claimants are middle and lower income families, with 91% of those claiming this tax relief earning less than $200,000 annually.
Fellow panelists at this forum included Seth Hanton, director of fiscal policy, Center for American Progress; Dean Stansel, adjunct fellow, Reason Foundation, and Eric Toder, Institute fellow, Urban Institute, and co-director of the Tax Policy Center.