A proposal being bandied about in Washington DC to eliminate mortgage interest deductions would be devastating to the East End real estate market should it be adopted.
The country is grappling with a huge budget deficit that literally grows daily. Democrats are pointing out that Mitt Romney suggested income tax deductions be capped at a certain percentage of income, and are using his idea as an impetus to open the discussion about eliminating mortgage interests deductions. Typically, though, the Democrats are twisting things around.
As Romney correctly pointed out, capping income tax deductions is akin to raising taxes -- the saved money flows into the treasury. Both plans would primarily affect the wealthy. But Romney's plan wouldn't mandate what deductions would be affected -- that would be up to the individual taxpayer.
For example, if mortgage interest were not an allowable deduction, wealthy investors who buy real estate and take mortgages to avail themselves of the tax benefit would still be able to pay cash. Middle class homebuyers need mortgages to afford a home, and rely on the mortgage tax deduction to make ends meet. In other words, despite the stereotypical belief that this administration is targeting the wealthy as a means of cutting the deficit, eliminating the mortgage interest deduction would have the opposite affect -- it is clearly aimed at the middle class.
The real estate market has been stagnant for five years, despite record-low mortgage rates. The reason is twofold: banks are reluctant to give out mortgages, and would-be buyers are afraid they will lose their jobs unless the economy improves, making them less likely to take the plunge into home ownership.
A healthy real estate market is critical to the East End economy. Yes, banks need to loosen the purse strings, but the government needs to do more: encourage home ownership, especially for first time buyers. To do that incentives may be needed, but certainly the ability of a homeowner to deduct the interest on his or her mortgage is crucial.
Locally, this should be a bi-partisan issue. If taxes must be raised, so be it: the people voted for a platform that targets the rich, and the people have spoken. Eliminating the mortgage interest deduction would be a slap in the face for those who thought they voted for a level playing field -- the move clearly affects the working class.