Is it MID-night for home ownership incentives?

BY Ken Clark

The Mortgage Interest Deduction is in the news. And while it may be a stretch to say that it’s on the chopping block, it’s relatively safe to say it’s on the negotiating table.

With the spirit of tax reform inspiring ideas inside the beltway in general, and in the White House specifically, many analysts are pointing their sharpened pencils at the MID – maybe not to eliminate it wholesale, but to reduce it dramatically.

Today, homeowners can claim as a tax deduction the interest on mortgage debt of up to $1 million. It’s a policy widely supported by voices in the home improvement and lumberyard industry, and industry editorial pages.

Earlier this month, when it was learned that a cap on the MID was being considered, the National Lumber and Building Material Dealers Association issued a call to arms – encouraging dealers to contact their elected representatives in Washington, D.C., and voice their support for the preservation of the MID.

Reports of proposals for a cap reduction to as low as $500,000 have appeared in various political publications.  

“NLBMDA continues to work on behalf of its dealer members to preserve the mortgage interest deduction,” said Ben Gann, the NLBMDA’s VP of legislative and political affairs. “There is a compelling case for tax reform, but it should not weaken incentives for home ownership.”

The NLBMDA summed up its hands-off the-MID position in its recent bulletin to members:

“Eliminating the MID would have a negative impact on housing: after-tax housing costs would increase and demand for housing would decrease. In turn, reduced demand would depress home prices, producing a sizable loss for existing homeowners that would have a drag on the economy.

“Homeowners do not expect to lose their MID, and prospective buyers anticipate taking the deduction,” the note continued. “Changing ‘the rules of the game’ would have a significant impact on the housing market in terms of owner and buyer behavior.”

[Click here for more on the NLBMDA's 2017 Policy Agenda.]

The lumberyard industry has a huge ally in the National Association of Realtors, one of the largest lobbying groups in the country. Meanwhile, opposition to the MID has been growing in editorial pages as diverse as the National Review and Slate. A popular argument against MID is that it unnecessarily benefits the wealthy.

In April, President Trump seemed to support preservation of the MID, with his administration promising to “protect the homeownership … deductions.” But the administration also said it intends to simplify the tax code, while decreasing the federal tax rates. The latest from Washington: Nobody knows for sure what’s going to happen to the mortgage interest deduction, if anything.

“NLBMDA urges its members to take action now by contacting their Representative and Senators and asking them to preserve the mortgage interest deduction and its critical role in American housing policy,” according to the NLBMDA.

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How do you feel about the mortgage interest deduction? Tell us at [email protected].


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