Real estate brokers in Otsego and Delaware counties agreed Monday that elimination of the mortgage interest deduction on federal income tax returns – an option being discussed during “fiscal cliff” negotiations in Washington, according to published reports – could be a drag on the housing market.
“It would be a very serious blow, I believe, not just in Otsego County, but nationally,” said Barbara Roberts of Prudential Fox Properties in Oneonta.
On the revenue side of the negotiations, President Barack Obama is pushing for higher tax rates on the rich, while Republicans are arguing that the government can increase its revenue by eliminating loopholes and deductions.
But doing away with the mortgage-interest deduction would be a step that even some Republicans would be reluctant to make. Stephanie Valle, a spokeswoman for Rep. Chris Gibson, R-Kinderhook, said Gibson was one of them.
“Congressman Gibson has been and continues to be supportive of the mortgage-interest deduction,” she said in an emailed response to questions about the deduction. “In Congress, he believes there is bipartisan recognition that this deduction is important and should be continued.”
The deduction has been part of the U.S. tax code since the Tax Reform Act of 1986. Prior to that, all interest had been deductible since the 16th amendment to the Constitution was ratified in 1913. That made income tax a permanent fixture or the government’s revenue stream.
The 1986 overhaul preserved the mortgage-interest deduction because it served as an incentive to home ownership.
The deduction is “a motivation for people to buy a house, because there are so few deductions left,” Roberts said. “I think that it would certainly impact ... the price point at which people would buy, if they did buy, and it would probably drive more people to rent rather than own.”
Becky Thomas of Benson Realty in Oneonta agreed with the idea that the deduction provides an incentive.