Every consumer press story at the moment seems to be about a slowdown in the housing industry (and don't you want them to shut up with their self-fulfilling prophecies?), the last thing we want to hear out of Washington is that a presidential panel on tax reform is recommending we submarine a housing tradition since 1913 — the home-mortgage tax deduction.
I guess we could get ourselves gripped into a high dudgeon over such bad news, but we should probably calm down a bit, because the changes are never going to happen. Here's why:
- Public opinion. According to a poll released by the National Association of Home Builders and done by Public Opinion Strategies, 75 percent of likely voters oppose the proposals. In divided Blue vs. Red America, this is tantamount to a consensus.
- Politics. In the face of such strong public opinion, what Congressman will vote against the deduction? And with public outcry over $270 million bridges to tiny Alaskan islands, how can Congress face down something with such near-universal appeal.
- Economic reality. While tax reform should be considered separately from today's economic realities, the truth is the panel was pressured by current events. This proposal ended up on the table because other tax revenue and expenses were off limits. The President would not allow the panel to suggest letting his tax breaks expire, and increased spending for Hurricane Katrina recovery and the Iraq conflict forced sideways decisions on tax breaks.
Still, the news sent a scare throughout the housing industry and the big trade associations — the National Association of Realtors, the NAHB, and the Mortgage Bankers Association — trotted out the big guns to shoot this down fast.
Often when trade associations react to bad news, they shoot fast and hard no matter what the threat. This time, the threat was real and the response appropriate. Even so, this dog won't hunt.
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