It's obviously going to be a Herculean task for Congress to balance the budget and reduce the deficit. It's sort of like the country song lyric that goes 'everyone wants to go to Heaven but nobody wants to go now.' It is estimated that the mortgage interest deduction cost the government $100 Billion last year which is why it is a target for cuts.
The Mortgage Interest Deduction has been part of Income Tax laws in this country since 1913. The United States of America is one of the few countries in the world that allow such a deduction. Our goverment has always supported homeownership as is evidenced in the different tax benefits it receives.
- Mortgage interest deuction up to $1,000,000 in acquisition debt on a principal residence and second home
- Deduction of interest on Home Equity debt of $100,000 over acquisition debt used for any purpose
- Capital gain exclusion on up to $500,000 for married couples filing jointly and $250,000 for single homeowners
- Favorable long-term capital gain rates if gain exceeds exclusion limits
- Property tax deduction
There is an interesting relationship between a good economy and a healthy housing market. Contrasted to profits from the stock market which tend to be plowed back into other investments, profits from home sales tend to be spent on consumer products that directly benefit the economy.
The National Association of REALTORS supports the MID and reports that one job is created for every two homes sold. It further states that $60,000 is pumped into the economy for each home sold and that homeownership accounts for over $2 Trillion of the U.S. gross domestic product.
American homeowers are currently paying 80-90% of all federal income tax collected. Some economists believe that a healthy housing market is a leading indicator for economic recovery and that tampering with a significant homeowner benefit like the mortgage interest deduction would hurt the economy.