Economists Speculating That Booming Growth of Government Debt Spells End to Tax Home Interest Deductibility and Property Taxes in the Future — USA Today Article
While housing continues the struggle to recover, some economists (not this one) are proposing an end to decades-long favorable tax treatments on housing.
Last year, the home mortgage interest deduction alone cost the government $80 billion out of the combined total $230 billion spent (of revenue lost due to tax breaks) on housing and housing related programs.
So what would be the ramifications of dropping favorable tax treatment on housing? I can think of these immediately:
- * Reduced homeownership rates
- * Reduced property values
- * Fewer real estate transactions (implying less lending on housing, fewer appraisals, surveys, title policies, inspections etc)
- * Negative impact to the US economy (think of all the economic activity that happens both prior to the sale of a property and after the transaction: new paint, carpets, landscaping, all of the related transactions expenses including fees and income to lenders, builders, redecorating and remodeling following the sale—the list goes on.
I would challenge the U.S. Government to list not only the expenses (read that as lost tax revenues) related to such a proposal, but also to include the lost economic activity and the blow that would deliver to an already staggered economy. Real estate represents one-fourth of the US economy and any long term impairment to real estate translates to long-term damage to the US economy.