Mortgage Deductions May Come under Scrutiny in Congressional Super Committee
The Congressional Super Committee charged with coming up with solutions to tackle the country's mounting deficit, and on which Rep. Van Hollen is a member, may look to trim mortgage deductions.
When the Congressional Super Committee convenes in September to start negotiations on how to tackle the country's mounting deficit, the issue of mortgage interest tax deductions will likely be on the table.
Interestingly, Rep. Christopher Van Hollen, D-MD, already has hinted that he might be open to possible changes in the mortgage deduction rules, and Congressional sources believe this might be one area in which both Democrats and Republicans can make some headway and possibly even reach a compromise.
John Koskinen, who heads Fannie Mae, is among those who believe the whole area of mortgage deductions will be at play as discussions among the 12-member bipartisan Super Committee get underway.
"They were never on the table before but now they may well be" as a result of the debt crisis, Koskinen suggested in a recent speech in New York state.
"Mortgage interest and property tax deductions are the third rail and until now they have been off the table," said Koskinen, a former Clinton administration official who headed the DC Control Board in the late 1990s.
Indeed, many observers now see a compromise within the Super Committee emerging around the need for new tax revenue—as well as spending cuts—and cite the long-standing mortgage breaks as one of the 'lowest-hanging fruits' on the tree.
"Lobbying groups who seek to preserve the housing write-offs already are gearing up for the battle on Capitol Hill," Harney writes. He notes that the National Association of Realtors sent an urgent letter to its 1.1 million members asking them to engage directly with members of Congress on the importance of preserving the real estate provisions.
The reason is obvious, as Koskinen and others have noted. Mortgage interest and property tax deductions represent a potential $1.4 trillion in savings.
And, seemingly substantial savings can result from what would appear to be reasonable tweaking—for example, lowering the amount that can be deducted on mortgage interest to $500,000 from $1.1 million at present, and possibly going after existing deductions for second homes as well.
(Last week, the Huffington Post reported on two representatives—Xavier Becerra from California and Pete Visclosky from Indiana—who take the mortgage deduction on homes that they claim are principle homes in Maryland. The 'principle home' of Becerra, who sits with Van Hollen on the Super Committee, is in Chevy Chase, MD. Visclosky's 'principle home' is in Takoma Park, MD.)
Those are moves that could be sold as "going after the rich" with only minor impact on the middle class, though it's a sure bet that real estate interests will strongly oppose them.
In any event, this is shaping up as a major battleground for the Congressional Super Committee. It's an issue to watch closely over the next few weeks.