End to Tax Home Interest Deductibility and Property Taxes in Future

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. 

 Experts: U.S. can no longer afford housing tax breaks- USA Today

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