Debate Over Florida Home Loan Tax Cuts Rages On

The recent proposal to eliminate tax preferences for home ownership is not sitting well with many home builders. However, a handful of economists believe the federal commission’s plan to trim mortgage interest deductions is required in order to address certain distortions across the market.

This debate is a result of Tuesday’s decision by a special panel, appointed by President Bush, to recommend reducing tax breaks for home mortgage interest and employer-provided health care, while increasing deductions for charitable contributions.

The mortgage proposal is attracting the most attention. Currently, home owners can deduct interest on mortgages up to $1 million. When the panel convenes on Noveber 1, it is expected to suggest a threshold of around $300,000 on its final tax code alterations. The aim of the mortgage and health care trims is to help pay for repeal of the alternative minimum tax, which will affect 20 million taxpayers next year.

Jerry Howard, executive vice president of the National Association of Home Builders, stated last week that his organization would fight for the rights of consumers.

“When this report is issued and the debate then begins … [we’re] going to do [our] damnedest to protect the preferred treatment of housing in the tax code,” he said.

Howard and Linda Goold, tax attorneys for the National Association of Realtors, say overhauling the tax code would be a long endeavor. In the short term, however, Linda is concerned that the panel’s proposal will cause individuals to hold off on buying or selling houses, while depressing values for more expensive home loans.

Home values vary around the country. The median home price nationally is $220,000, but stands around $322,000 out west. In the Northeast, it’s $254,000. In a recent report, the nonpartisan Congressional Budget Office said capping the deduction at $500,000 could increase tax revenue by nearly $50 billion from 2006 to 2015.

Leading up the November 1, and then in the days/weeks immediately following the proposal, expect this issue to gain momentum on a national scale. The final decision will affect millions from all areas of the United States.