Some labels on the charts on the front page of today's Real Estate section, which was printed in advance, are incorrect. The charts compare the effect of proposed changes in tax law on four different homeowners. In each chart, the first set of shaded figures should be labeled "With Current Deductions" and the second set should say "Under Proposed Plan."
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Deduction Eruption
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According to the Joint Committee on Taxation, the report continues, "more than 55 percent of the estimated tax expenditures for home mortgage interest deductions went to the 12 percent of taxpayers who had cash income of $100,000 or more in 2004."
The home builders and Realtors warn that the proposal could shatter the nation's 69 percent homeownership rate. But the panel looked at countries that don't allow home mortgage interest deductions for tax purposes, including Britain, Australia and Canada -- and found little difference. The rate of home ownership is about the same in Britain, 70 percent in Australia and 66 percent in Canada.
Among the supporters of tax changes in the housing area are people as diverse as Robert B. Reich, who was President Bill Clinton's secretary of labor, and Kevin A. Hassett, director of economic policy studies at the American Enterprise Institute.
Hassett said prices would drop perhaps 8 percent for expensive homes, but less expensive houses could see increases because many people who currently receive no tax subsidy would get the 15 percent home credit. And lower-income families' increased buying ability could offset price declines higher up the chain, he contends, because it would increase demand from the people who sell to them and can then move up.
Treasury Secretary John W. Snow is charged with responding to the recommendations, under the executive order President Bush issued in January when he announced the formation of the bipartisan tax commission. Snow has not yet said when he would respond.
Congress must then take its shot at any proposed legislation.
While action on the plan may not occur anytime soon, some think the seeds of change have been planted.
"The fact of the matter is, I don't think anyone intended for action to be taken on it this year. . . . There's no time to consider anything this voluminous," said Tom Ochsenschlager, vice president of taxation for the American Institute of Certified Public Accountants. "I'm thinking not much will happen until 2007. . . . But it does put all this stuff into play. And people will be able to say . . . some of the greatest minds in the country came up with this idea."
