Mortgage Interest Deduction: Not A Tax Break For The Middle Class [View all]

[abelenkpe]

Mortgage Interest Deduction: Not A Tax Break For The Middle Class

http://www.huffingtonpost.com/ben-hallman/mortgage-interest-deduction_b_2213304.html?utm_hp_ref=business

As Washington searches for ways to drum up tax revenues in a bid to avert the fiscal cliff, the interest deduction some homeowners claim on their mortgages may be on the chopping block.

The possibility that this deduction might go away has prompted the sort of dire warnings that might be reserved for news that the American flag will lose its stars and stripes: The housing market, finally recovering from a long decline, will plunge anew as values fall. People won't buy as many homes. Middle-class families will suffer and despair.

But this view, voiced with the most conviction by lobbyists for home builders and real estate agents, simply isn't grounded in reality. The deduction helps some middle-class families to a modest degree, but it is mostly a giant giveaway to the wealthy. Moreover, there's no evidence to suggest home prices would crash or people would suddenly choose renting over buying if it went away.

"It's time to take a closer look," said John Taylor, the president of the National Community Reinvestment Coalition, which advocates for low-income borrowers. "This is far and away the government's largest housing subsidy, and it primarily benefits people who are financially comfortable and some people who are extremely financially comfortable."

(snip)

Most likely, the mortgage deduction will stay, in some form. The deficit reduction commission led by former Sen. Alan Simpson and former White House Chief of Staff Erskine Bowles proposed reducing the limit on the deduction to $500,000 of a home's value, down from $1 million, and eliminating the tax break for a second home -- options that seem likely to attract broad support.

The Obama administration has also proposed a cap on deductions at 28 percent for high-income households. This could force homeowners to choose between claiming a mortgage debt or some other kind of deduction. In either scenario, middle-class homeowners would retain their tax credit.

(more at link)


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I do not own a home so I'm interested in what others here think of this? I do know that even a modest two bedroom one bath in Culver City and much of los angeles goes for anywhere from 650,000 to 1.2 million so I think it would effect middle class families and the housing market. At least here.

What say you DU?