Surveys released in the past two months by both opponents and supporters of the mortgage interest deduction (MID) seek to influence the fate of the popular tax break for homeowners as Congressional and Administration leaders struggle to find revenues to avoid the pending fiscal cliff that will trigger massive tax increases and spending cuts at the end of the year.
Surveys released in the past two months by both opponents and supporters of the mortgage interest deduction (MID) seek to influence the fate of the popular tax break for homeowners as Congressional and Administration leaders struggle to find revenues to avoid the pending fiscal cliff that will trigger massive tax increases and spending cuts at the end of the year.
The latest measures of public attitudes could be critical as the clock ticks down for the Administration and the lame duck Congress to reach a concensus. Most observers believe the mortgage intrest deduction, one fo the most costly single deductions in the tax code, is on the table for discussion.
For two years President Obama has sought to limit the value of the deduction for homeowners making more than $250,000 though during the campaign he said he would retain the deduction, as did Governor Romney. Limiting the deduction for earners, however, raises only about $40 billion over a decade – only 4 percent of the deduction’s total cost to the federal budget .“There are a lot of special-interest loopholes in the tax code, both corporate and personal," said House Speaker John Boehner, R-Ohio recently. "There are all kinds of deductions, some of which make sense, others don't."
Ironically, the debate over the MID is heating up as its cost to federal revenues decline due to the housing depression and the reduction in homeonwership Revenues fell by almost $71 billion for 2009 compared to 2007, a 14 percent drop, according to the Internal Revenue Service. That trend continued in 2010 as preliminary data showed that lower interest rates, home ownership and home prices curbed use of the tax deduction by 7.2 percent. The use of the mortgage interest deduction peaked at the federal level in 2007 with the tax break showing up on 40.8 million returns. That fell to 36.5 million for 2009, according to the IRS. The amount deducted declined from $491 billion to $421 billion for those tax years.
Perhaps the most surprising survey was sponsared by real estate Web site Zillow, which relies on advertising revenues from real estate brokers. The survey of mor than 100 leading housing economists and experts found that 10 percent believe the mortgage interest-rate deduction should be thrown out as soon as possible, while 50 percent believe it ought to be phased out over time. Only 10 percent thought it should remain the way it is, with 30 percent saying that eligibility deserves more restrictions at the very least.
“Although the mortgage interest deduction remains enormously popular with existing and aspiring homeowners, it costs the federal government about $90 billion a year,” Terry Loebs of Pulsenomics LLC the firm that conducted the survey.
The National Low Income Housing Coalition, which opposes the MID, surveyed 1000 consumers in August but didn’t release the results until October, when it would have more impact on the MID debate. About 56 percent of respondents said they support replacing the current mortgage interest tax deduction with an alternative that offers the same percentage deduction to all homeowners without taking income into account. The survey found that 63 percent believe tax deductions should only apply to those whose mortgages are $500,000 or less. This idea was set forth by the National Low Income Housing Coalition. In the same survey, 69 percent of respondents said the federal government should offer programs to support affordable rental housing.
A much more current survey by the American Institute of Architects, a supporter of the deduction, found that nearly 70 percent of voters oppose repealing the mortgage interest tax deduction to cut the federal deficit. In addition, 71 percent of voters favor extending the tax incentive for making houses and commercial buildings more energy efficient.
The AIA survey, which was conducted Oct. 2 through 4, also found that 64 percent of voters believe the government should invest in energy efficiency if such an investment would result in lower utility bills over the next ten years. Seventy percent of voters surveyed would like to see federal income tax laws changed to allow homeowners to deduct losses when they sell a home for less than they paid for it.
Perhaps the least partisan and most accurate tracking of public sentiment on the issues has been conducted by the Pew Research Center.
In a Pew Center poll released October 12, the public was split over limiting tax deductions for mortgage interest as a way to reduce the national debt: 47 percent approve and 44 percent disapprove of this proposal—a virtual tie since the difference falls within the survey’s margin of error. The results follow a Pew Research Center poll last year, which found that 49 percent of Americans favored reducing the deduction compared with 43 percent who preferred no change. Taken together, the two poll make a good case that public support is waning as public concern over the deficit grew during the campaign and now that it is over, the fiscal cliff looms nearer every day.
Will any of these surveys make a dent on the outcome? Probably not, but when the time comes for Congress to approve a compromise, members won't have to go far to find welcome cover in a survey, whichever way they vote.
