From left: President Barack Obama and Utah Senator Orrin HatchThough critics have long panned sections of the U.S. tax codes that subsidize housing and mortgages as overly expensive and unfairly benefiting the wealthy, policy makers at a Senate Finance Committee hearing were wary of changing any law that could do more harm to the fragile housing sector, the Wall Street Journal reported.
The mortgage-interest deduction tax code deducts taxes from mortgage interest and property taxes and excludes home sellers from the capital gains tax on most sales. Some say it facilitated the housing bubble, and the Congressional Budget Office has estimated that gradually abolishing it would save about $215 billion by 2021. Other research has shown eliminating the code would have a minimal affect on the nation’s homeownership rate.
With the federal budget under the spotlight in recent months, President Barack Obama proposed limiting the mortgage tax deductions to families that earn more than $250,000 each year. He said it would raise $400 billion over 10 years.
Nevertheless, to the delight of housing lobbyists, many politicians are wary. “With respect to the tax code, there are a number of proposals that would alter the treatment of housing, but any changes should happen only with the utmost care and significant transition periods,” said Utah republican Senator Orrin Hatch in a written statement for a Senate Finance Committee hearing. [WSJ]