An outline for comprehensive tax reform released by a group of legislators and administration leaders known as the "Big Six," if enacted, could lead to a tax on homeownership for millions of Americans, according to the National Association of Realtors (NAR). The plan is opposed by the national Realtor group, and the California Association of Realtors.
The proposed plan doubles the standard deduction and eliminates all personal deductions except the mortgage interest deduction and the deduction for charitable contributions. The plan eliminates the deduction for state and local taxes.
NAR estimates this one-two punch will deliver a crippling blow to middle class homeowners by removing economic incentives for homeownership and raising taxes by an average of $851. By doubling the standard deduction, the mortgage interest deduction would only be available to the top 5 percent of taxpayers.
"This proposal recommends a backdoor elimination of the mortgage interest deduction for all but the top 5 percent who would still itemize their deductions. When combined with the elimination of the state and local tax deduction, these efforts represent a tax increase on millions of middle-class homeowners," said Bill Brown, president of the national Realtor group.
In California, the tax plan would eliminate the incentive for people to buy homes, shrink the middle class, and raise taxes on hundreds of thousands of homeowners. According to the state Realtor association, the average California homebuyer could end up paying $3,000 more a year in taxes under the proposal.
"Homeownership has and continues to be the best way for families to grow wealth and increase the middle class. Congress should look at ways to incentivize and increase homeownership rates, not increase taxes on families wanting to buy a home," said Geoff McIntosh, president of the state Realtor group.
Denise Welsh, president of the Silicon Valley Association of Realtors, also registered Realtor concerns on what the tax plan would do for homeownership. "The plan would nullify the incentive to purchase a home, bring down home values across the country, and hurt the American dream of homeownership," said Welsh.
Welsh noted numerous studies have shown the value Americans place in homeownership and its tangible social benefits. "Owning a home has had long-standing government support in this country," said Welsh. "Historically, lawmakers have understood the value of homeownership in fostering communities, creating social stability, and building wealth over the long term."
Homeownership helps lower community crime rates and provides more neighborhood stability. Homeowners' involvement in community quality-of-life issues helps prevent crime, improves childhood education and supports neighborhood upkeep.
"For more than 100 years, Realtors have helped people become homeowners," said Welsh. "Families need a place to call home, and the pride and community engagement that comes with homeownership continues to stand the test of time. Purchasing a home is an investment in the community. People have greater stake in what happens in their local area when they own rather than rent. Families and neighborhoods build lifelong bonds that create strong foundations for future generations."
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.