While appearing before the Senate Finance Committee, Iona Harrison, chair of the National Association of Realtors’ (NAR) Federal Taxation Committee, told senators that putting homeownership in the crosshairs of tax reform would strike at millions of American households.
“Real estate is the most widely held category of assets that American families own, and for many Americans, it’s the largest portion of their family’s net worth,” Harrison said. “As 64 percent of American households are owner-occupied, we believe that homeownership is not a special interest, but is rather a common interest.”
Recent proposals for tax reform have included the elimination of state and local tax deductions, a near doubling of the standard deduction and caps to the mortgage interest deduction (MID), a tax deduction that has been criticized for widening the wealth gap.
Harrison responded to critics of real estate deductions, noting:
- 70 percent of the value of real property tax deductions in 2014 went to taxpayers with incomes less than $200,000;
- 53 percent of individuals claiming the itemized deduction for real estate taxes in 2014 earned less than $100,000;
- 32.7 million tax filers claimed a deduction for mortgage interest in 2015;
- Half of taxpayers with mortgages over $500,000 have adjusted gross incomes below $200,000, according to research conducted for NAR.
“When Congress last undertook major tax reform in 1986, it eliminated or significantly changed a large swath of tax provisions, including major real estate provisions, in order to lower rates, only to increase those rates just five years later in 1991,” Harrison said. “Most of the eliminated tax provisions never returned, and in the case of real estate, a major recession followed.”
Harrison, noting that homeowners pay 83 percent of all federal income taxes, stated that tax reform that raises their taxes will be a “failed effort.”
“But NAR supports the goals of simplification and structural improvements for the tax system, and individual tax rates should be as low as possible while still providing for a balanced fiscal policy,” Harrison added. “We simply believe that to achieve these goals, Congress should commit first to doing no harm to the common interest that homeownership provides.”