In February, the White House created the National Commission on Fiscal Responsibility and Reform to examine how the country spends money and collects taxes. The commission also was tasked with creating a proposal that would cut the federal budget deficit.
MAKING SENSE OF THE STORY
- The deficit commission’s proposal was released to the public this week and calls for cutting the federal debt by $4 trillion through 2020 by upending many tax and spending policies.
- Among the proposed changes include a recommendation to reduce the mortgage interest deduction (MID) currently offered to homeowners as an incentive to own a home. The ability of homeowners to deduct the interest paid on mortgages is a powerful incentive for home ownership and has been one of the simplest provisions in the federal tax code for more than 80 years.
- The commission’s proposal would change the MID to a 12 percent non-refundable tax credit, with no credit offered for mortgages higher than $500,000 nor for interest on a second residence or home equity.
- The California Association of Realtors and the National Association of Realtors are strongly opposed to the proposed changes to MID and are working vigilantly to ensure elected officials are aware of the opposition and that implications of the proposal are understood.
- As the housing market continues to recover from the worst financial crisis in recent history, any change that reduces the ability of the market to heal is misguided and must be rejected. The proposal from the commission will negatively impact the housing market, further erode opportunities for homeownership across the country, and will contribute to further price declines and diminished equity for homeowners.
- Although the proposal has been made public, the full 18-member panel still must vote on the proposals before a formal recommendation can be issued to Congress and the White House. A vote is expected to take place Friday.
- Homeowners and home buyers are encouraged to call their member of congress and urge him or her to preserve the MID.
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