Mortgage Interest Deduction Important to Middle Class Homeowners and Housing Market
Eliminating or curtailing the mortgagerninterest deduction would have a disproportionate impact on younger middle-classrnfamilies according to testimony given by a representative of the NationalrnAssociation of Home Builders (NAHB) to the Senate Finance Committee. The Committee was conducting hearings on taxrnreform options to provide incentives for homeownership.</p
Robert Dietz, an economist and assistantrnvice president for NAHB told the senators that the way housing is treated byrntax reform will shape the economy going forward. Homeownership is considered byrnmost Americans to be their single best long-term investment and source ofrnwealth and financial security, he said. “Wernbelieve that any policy change that makes it harder to buy a home, or delaysrnthe purchase of the home until an older age, will have a significant long-termrnimpact on household wealth accumulation and the make-up of the middle class asrna whole.” </p
Focusing on the mortgage interestrndeduction, Dietz said that tampering with it in the short term could underminernthe already fragile housing market, hurting demand, further lowering homernprices, putting more homeowners under water and triggering even morernforeclosures.</p
He disputed claims that the deductionrnbenefits only wealthy taxpayers because so few homeowners itemize theirrndeductions in order to claim it. To therncontrary, he said, 70 percent of the benefits go to middle-class home ownersrnwith household income under $200,000. Arndeduction that reduces the net cost of monthly house payments is particularlyrnimportant to younger home buyers who typically have less equity and are payingrnmostly interest in the early years of the mortgage. </p
Dietz also defended home mortgagerninterest deduction for second or vacation homes on the basis that itrnfacilitates moving when owning two homes during the year or when holding arnconstruction loan for a future home. rnEliminating this deduction, he said, could also threaten the economicrnviability of second home and vacation markets which can include small towns inrnstates like Maine, Colorado, and Florida. rn”49 states have a county where at least 10 percent of the housing stockrnconsists of second homes,” he stated.<br /<br /Dietz also stressed the importance of several other housing tax incentives,rnincluding the Low Income Housing Tax Credit, which produces approximatelyrn90,000 full-time jobs per year.
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