We’ve been following the news of late, and one thing that seems to get the NAHB and other housing-centric organizations up in arms is eliminating the mortgage interest deduction. What’s equally concerning, is how much furor and reaction is generated by so little movement in that direction. In fact, the elimination of the mortgage interest deduction might not even be a bad thing.
Eliminating the Mortgage Interest Deduction Sounds Crazy
Does that sound like crazy talk? Let’s explain our thoughts and why this may be the perfect time to kill the mortgage interest deduction – and at the same time kill the IRS in the process.
First off, we’re NOT saying that mortgage interest should be specifically targeted as a means to increase government revenues or to punish the middle class and generate more taxes. No, what we’re saying is far different and involves something that may be perfectly implemented along with a lagging housing market. Something that would actually BOOST the housing market more than any other buying incentive out there.
Imagine, if you will, the elimination of all income taxes and corporate taxes. Do we have your attention? Good.
The Fair Tax Plan Could Work
There is a comprehensive tax proposal that involves eliminating the mortgage deduction while replacing all federal income and payroll-based taxes. It uses an integrated approach including a progressive national retail sales tax, a prebate (and we’re talking around $6k for a family of four) to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue neutrality, and, through companion legislation, the repeal of the 16th Amendment.
This tax plan would be nonpartisan. It abolishes all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes and replaces them with one simple, visible, federal retail sales tax administered primarily by existing state sales tax authorities.
The plan taxes consumers only on what they choose to spend on new goods or services, not on what they earn. This type of tax is a fair, efficient, transparent, and intelligent solution to the frustration and inequity of our current tax system.
Fair Tax Plan Details
The Fair Tax plan has several key details that help it make sense:
- Enables workers to keep their entire paychecks
- Enables retirees to keep their entire pensions
- Refunds in advance the tax on purchases of basic necessities
- Allows American products to compete fairly
- Brings transparency and accountability to tax policy
- Ensures Social Security and Medicare funding
- Closes all loopholes and brings fairness to taxation
- Abolishes the IRS
Eliminating the Mortgage Interest Deduction – A Problem of Optics
Now, what’s the problem? Well for years, it was almost unconscionable for consumers to imagine the price of housing and cars to go up by the estimated 23% that would be added in the form of a national sales tax. But… with the housing market down more than that amount, and factoring in the complete elimination of all corporate and individual income taxes – what does that mean for the potential of this plan?
A net gain – and a big one.
With the economy down, and the housing market depressed, this is actually the perfect opportunity for real change. Why are we all for it? Look at the reasons above – and then do the math. There is a handy calculator online at one of the best versions of this type of national sales tax, you can click on it here and see how you’d benefit.
Eliminating the Mortgage Interest Deduction Without Changing the System
Now, if the tax system isn’t scrapped entirely, then the NAHB indeed has something to shout about. Eliminating the mortgage interest deduction isn’t something that we’d encourage on its own, especially given this Congress’ proclivity towards printing money and spending what it doesn’t have. The National Association of Home Builders (NAHB) launched a (now delisted) consumer-oriented website, SaveMyMortgageInterestDeduction.com, to provide up-to-date information on the threat to the mortgage interest deduction.
“Americans overwhelmingly oppose any action by Congress to tamper with the mortgage interest deduction, but it could be eliminated or scaled back as Congress and the Administration are looking at tax increases in light of deficit concerns. The consequences would be devastating for home owners, the housing market and the nation’s economy.”
NAHB President Bob Jones, a home builder from Bloomfield Hills, Mich
The website separates the myths about the mortgage interest deduction from reality and shows why this cornerstone of American housing policy is essential for millions of middle-class homeowners and families that aspire to own their own home.
The site contains fact sheets, frequently asked questions, statistics, and other important information to allow consumers to stay informed as the debate on the mortgage interest deduction moves forward. Most importantly, it tells visitors how to remain engaged and make sure their opinions are heard on this important issue.
But seriously, if you ever have a chance to vote to abolish the IRS, don’t blow it!
