Builder Pulse

The Mortgage Interest Deduction Debate Fires Up

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In Builder Pulse's Sept. 27 issue, we called attention to a UPI article by Steve Cook that tapped into a Zillow survey whose findings point to broad disfavor with the mortgage interest deduction among Zillow survey respondents.

The UPI article's headline was "Housing Economists Hate the MID," and the article quoted exactly one economist. Here's how we played the item in Pulse:



Here's a response to the piece from Larry S. Kush, National Area Chairman for the National Association of Home Builders:

How to lose an election – 101

By Larry Kush

If ‘pro’ is the opposite of ‘con’ what is the opposite of ‘progress’?

If you answered “Congress,” the late Paul Harvey, who asked the question, would have agreed with you, and he might have called your attention to a stifling proposal that’s been making the rounds in Washington and would seriously damage one of our most cherished institutions – home ownership.

About one and one half years ago, the Obama Administration proposed a cutback in the mortgage interest deduction (MID), a fractional cap on deductions taken by households with larger incomes. More recently, late last year his deficit commission proposed serious changes in tax policy that would harm housing on a number of fronts. Innocuous as it may seem to some, there is a real possibility that these actions are just the first step in a longer-range campaign to eliminate the mortgage interest deduction for home owners in general.

When government kills a deduction that’s been around as long as the MID, they essentially are creating a new tax – something American voters are finding more and more unacceptable. This cutback would require America’s homeowners to help pay for an ever-expanding government. Additionally, it would put the dream of homeownership further out of reach for America’s new families.

There are many good reasons to keep the MID. And the reasons to kill the deduction just don’t hold water. First of all, a home of your own has always been the foundation of the American Dream. The social benefits are immense. President Franklin Delano Roosevelt said that a nation of homeowners is unconquerable. President Clinton called homeownership an essential part of the American Dream, and PresidentGeorge W. Bush said it has the power to transform people.

Documented research has shown that there is a higher educational performance and better behavior of children among homeowners, that crime rates are lower, where is less dependency on welfare, greater household participation on in civic affairs and better household health. As intangible as some may paint it, pride of ownership is the number one reason why people strive to own their own home.

From a financial standpoint, there is absolutely no question that buying a home has a number of advantages: Deduction of mortgage interest. Deduction of real estate taxes.Capital gain exclusion. And the fact that, regardless of market ups and downs, in most cases the value of the typical family home is that family’s major asset. Paying off a mortgage for many has become a form of enforced savings.

Economists, market experts and analysts agree that elimination of the MID would result in a further drop in home values. There would be even more foreclosures. Home sales would suffer. And even greater unemployment would result.

Bob Jones, a former chairman of the National Association of Home Builders, had this to say about the proposed legislation: “The collateral economic damage of what happens when something comes along to pull the rug out from under housing values is all around us, so who in their right mind would advocate a plan to bring down housing prices by 10% or more? The MID was not responsible for the housing bubble; countries without an MID have also experienced dramatic swings in housing prices in recent years. The benefits of the MID are also expansive in scope geographically.”

Public support for retaining the interest deduction is overwhelming. According to a nationwidesurvey of likely voters this past September, nearly 80 percent support retaining federal tax incentives to promote homeownership, which has been in the tax code since the introduction of federal income taxes in 1913, nearly a century ago. Surprising to some but not to me, an even higher percentage (82 percent) of renters favor providing tax incentives to promote homeownership. Most renters aspire to someday become owners.

Which brings us to “How to Lose an Election – 101.” Voters stated in the poll that they would be less likely to vote for a candidate for Congress who supported either eliminating or reducing the home mortgage interest deduction. The message is clear.

Yet, our obese federal government still lumbers and wheezes down Pennsylvania Avenue with pending bills of extravagant legislation fluttering from the folds of it’s bureaucratic fat. Eliminating this tax break for home owner’s is tantamount to forcing new taxation on an economy where most thinking people believe the best way out of a hole is not to dig it any deeper with new taxes.

Larry Kush is national area chairman of the National Association of Home Builders (NAHB) for a six-state area including Arizona, Colorado, Nevada, New Mexico, Utah and Wyoming. He is the former Chairman of the Home Builders Association of Central Arizona andcurrently serves as an honorary life director. A home builder for 30 years, he has been selected five times the Phoenix Home Builder of the year. Larry can be reached at


Comments (5 Total)

  • Posted by: Anonymous | Time: 12:37 PM Friday, September 28, 2012

    The thing that bothers me is the speculation in this article. It refers to "larger incomes" well if that is people who make over 250k as an example, that isnt going to hurt to the sector of people who are hardest hit by what the home market has done. I am in favor of the MID, but not in favor of striking fear in voters based on speculation. And again there are no hard numbers here to debate intelligently about.

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  • Posted by: Anonymous | Time: 11:37 AM Friday, September 28, 2012

    I have paid off my mortgage, but totally in favor of the MID - for my children- theirs,etc. The talk of helping middle america has a foundation, the MID - .Take it away and not only is the Dream affected, but ALL THE DISPOSABLE INCOME FOR BOTH HARD SOFT PRODUCTS IS GREATLY REDUCED!

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  • Posted by: Anonymous | Time: 10:36 AM Friday, September 28, 2012

    If there were ever a point in-time to eliminate the MID this may be that time due to current low interst rates. Anyone capable of qualifying for Re-Fi finds current rates are below 3%. However, I personally don't believe Congress can or will eliminate the MID without a total restructuring of the tax code in favor of something like a Flat Tax or National Sales Tax to replace the current Income Tax system. Killing the MID along with Tax System restructuring would provide the cover of an "exchange" with simplification and little total tax increase. But let's be realistic, the true purpose for eliminating the MID is to increase Tax Revenue, not simplify the life of the tax payer, so any move in this direction would take us closer to the Socialistic ideal the Left has in store for this country.

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  • Posted by: Anonymous | Time: 10:35 AM Friday, September 28, 2012

    For many of us who are underwater on our mortgages, the tax incentive is a godsend to help with that check that is more and more difficult to pay. With no way of refinancing or getting out, we're stuck with what we have until the housing prices come up. This is not going to get any better if Congress removes this tax incentive and less people are buying homes. And so for many of us, we will continue to sink into this pit of quick sand. This seems like the worst time to introduce a huge tax change like this for current home owners.

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  • Posted by: Anonymous | Time: 10:22 AM Friday, September 28, 2012

    If the MID is so essential, how is it that our neighbors in Canada have a comparable rate of home ownership? Mr. Kush's arguments don't wash, and instead come across as self serving. Eliminating the MID and doing so in a manner that is revenue neutral is not a tax increase, but rather tax simplification. A system without the MID would be much more equitable to renters and those who have paid off their mortgages than the current system.

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About the Blogger

John McManus

thumbnail image John McManus is an award-winning editorial director for the Residential Construction Group at Hanley Wood in Washington, DC. In addition to the Builder digital, print, and in-person editorial and programming portfolio, the group includes strategic content direction for Affordable Housing Finance, Apartment Finance Today, Custom Home, Multifamily Executive, and Residential Architect.