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Daily Real Estate News  |  November 22, 2010  |   MID Talk Already Chilling Markets, NAR Says
A draft proposal floated two weeks ago by the co-chairs of President Obama’s Deficit Reduction Commission that considers proposals for modifying the mortgage interest deduction among other big changes to taxes and federal programs is already creating a chill in housing markets, NATIONAL ASSOCIATION OF REALTORS ® President Ron Phipps said in a letter to the commission chairs last week. “Some consumers already believe that the MID will not be available to them,” Phipps said. “Your recommendation has sown the seeds of uncertainty as even current owners fear that they will not be able to claim the MID and that their homes will lose even more value.”

The commission chairs are former Clinton administration chief of staff Erskine Bowles and former Wyoming Senator Alan Simpson.

President Obama created the 18-member, bipartisan commission earlier this year to identify ways to balance the budget by 2015. The panel is supposed to provide the president its recommendations on Dec. 1. To be part of the final report, recommendations must be approved by at least 14 of the members.

In his letter, Phipps said REALTORS ® would reject any tax law changes, including modifications to MID, that would impair Americans’ ability to own their homes and to invest in real estate. “The federal policy choice to support home ownership has been in the Internal Revenue Code since its inception,” he said. “We see no valid reason to undermine that basic decision. Indeed, we believe that the only viable tax system is one that would continue to nurture home ownership.”

NAR estimates that any paring back of MID, whether at once or over time, would reduce home values by an average 15 percent. Phipps called that level of wealth destruction “unacceptable,” particularly since “this loss of value is never fully recouped” and it would come at a time when the U.S. economy can’t turn around without a stable housing sector.

Phipps drew on NAR analyses of previous efforts to change tax policy, including 1986, 1996, and 2005 tax reform efforts, to show the detrimental impact changes such as curtailing deductions or turning some of them into credits would have on housing and the economy. Those analyses made clear that the changes were proposed without fully understanding their negative impact on households and communities.

“Calling home ownership the American Dream is not a mere slogan,” said Phipps, “but rather it expresses a bedrock value. Owning a piece of property has been central to American values since Plymouth and Jamestown. Homes are the foundation of our culture, the place where families eat and learn together, the basis for community life. The cottage with a picket fence is an iconic part of our heritage."

Source: Robert Freedman, REALTOR ® Magazine Online

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