The Obama budget announced this week – in the middle of biggest housing crisis since the Great Depression – seeks to raise tax revenue by removing the mortgage interest tax deduction for those that are in the 33% and 35% income tax brackets.
What? You’ve got to be kidding, right?
I can’t count the ways this is bad for housing. The one big reason renters all across this country make the decision to become home owners is the extra incentive the tax code gives them. Sure they have the, “I can paint the walls any time I want without getting permission from anyone” reason, but that is no where near as motivating as $1,000’s they get via the deduction every year.
Obama limiting this to the “wealthy” may think he’s not hurting those home owners in the lower tax brackets, but he’d be wrong. The housing market is a connected market. In other words, what hurts home values at the top eventually spreads lower depressing all home values.
Aren’t home values depressed enough?
Another big problem with this proposal is that those “wealthy” folks buy homes in the areas of the country still getting ravaged by massive foreclosures. Places like Arizona, California, New York, and Florida need this like they need a hole in the head.
These States are still reeling from a glut of homes due to the foreclosure crisis. Many of which are of the “luxury home” variety. I guess Obama forgot that only the rich can afford a luxury home.
Don’t get me wrong, I’m not crying for the rich. I’m crying for the housing recovery. Choking it off before we even get started is just plain dumb.
So Obama and his removal of the mortgage interest deduction wins my “Dumbest Idea of the Week” award.
Can’t wait for next week!
Photo Credit: SEIU International