My career focus has been on commercial real estate for almost forty years, and I am therefore tangentially interested in the housing market—and I also own a home with a mortgage.
I must be missing something about the home mortgage interest deduction (MID). Real estate people are supposed to stand for free enterprise, individual initiative, and fair dealing. How does a vested-interest tax break help further those ideals?
I’m disappointed in our industry’s business-as-usual reaction to the possibility of removing the MID in exchange for much lower tax rates overall.
If we are concerned about housing, why not let rent be tax deductible? I’m sure a study will show that this move would really help a lot of people, along with those in our industry who provide rental housing.
Beyond rent, what else is a general “good” that we should subsidize? What about farmers and ethanol? That one’s already been done, to our collective great waste and expense. Farms are great. But subsidizing ethanol from corn is now recognized as misguided. How did we get the two mixed up? Homes are great, but why subsidize debt, of all things?
More importantly, underlying this perceived “good” is the assumption that home ownership is good. That may be, in many cases. But just look at the following:
1. On an individual level, how many families have tragically been lured into taking on too much debt, on the false belief that debt is some kind of “good”, because you get a tax break? With a disastrous toll on those same families when they can’t pay, or their home’s value is underwater.
2. On a macro level, drive through the neighborhoods of empty and uncompleted single family homes that are a blight on their communities, a beacon for crime, and a great loss to their local tax base. That’s part of the harsh reality of a home ownership program driven by tax breaks that we try to cover up with the ideal of picket fences and chirping bluebirds
No matter what a study or survey may report, isn’t it reasonable that if people keep 80% or more of all that they earn, then they will spend quite a bit on housing?
And even if they don’t for a year or two, while the economy takes off again on lower tax rates, hasn’t the MID pushed too much of our economy’s resources into housing, and contributed to the housing bubble in some markets?
What if our industry took an alternate path with a national vision?
What if we were the first large industry to take the lead and challenge the nation’s other legislative lobbies and unions with the following vision that goes beyond our own special interest:
”For the future of America, and the families and homes that we love, we challenge you to agree with us to give up our special tax break if you will give up yours, and the top tax rate is lowered to no more than 19%.”
That would put us in the forefront of national leadership, and give support to those on both sides of the political spectrum who want to reduce and simplify our unfair and bloated tax structure.