Several witnesses spoke about the need to reform the mortgage interest deduction (MID) – a $70 billion tax expenditure that primarily benefits higher income homeowners.
Republican leadership in the House outlined a path forward for tax reform last week, saying that they will release more tax reform details the week of September 25.
Republican leadership will advance a budget resolution in October with language for tax reform.
Chairman Orrin Hatch (R-UT) used his opening statement to assert the Senate’s independent role in developing tax reform legislation. Hatch stated that the Finance Committee is not “anyone’s rubber stamp” and that the “Big 6,” a working group of Republican leaders in Congress and the administration, “will not dictate the direction we take in this committee.” The “Big 6” – a group of top policymakers in Congress and the Administration – continues to negotiate towards a consensus on tax reform. But reports indicate that the group is still undecided on several critical items, including how to pay for cuts to the corporate and individual tax rates.
Although Mr. Hatch did not indicate whether he supports reforms to the MID, Ranking Member Ron Wyden (D-OR) defended the tax break and accused Republicans of “going after…incentives for home ownership.” Evidence shows, however, that the MID has little to no impact on people becoming homeowners.
Several other witnesses urged Congress to reform or eliminate the MID. Alex Brill, a fellow at the American Enterprise Institute (AEI), noted that the MID increases the complexity of the tax code and, like other itemized deductions, is “distortionary and regressive.”
Ramesh Ponnuru, a visiting fellow at AEI, argued that eliminating or scaling back the MID could help pay for proposals to expand the child tax credit.
The tax-writing committees also continue to hold hearings on tax reform, with the Senate Finance Committee holding a hearing on business tax reform tomorrow. The Senate Finance Committee also held a hearing on individual tax reform last week, during which Sens. Maria Cantwell (D-WA) and Johnny Isakson (R-GA) spoke positively about the Housing Credit, with Sen. Isakson specifically identifying its importance after natural disasters like Hurricanes Harvey and Irma.
As tax reform discussions intensify in the House and Senate, it is a critical time for advocates to make the case to preserve, strengthen and expand the Housing Credit and New Markets Tax Credit (NMTC.)