Republican National Convention 2012: Platform Committee voted against preserving the mortgage interest tax deduction

Republican National Convention 2012: Platform Committee's vote on the mortgage interest tax deduction on Aug. 20, 2012. SOURCE: C-Span.org

ANALYSIS:  

The Republican’s platform committee last week voted against preserving the home mortgage interest tax deduction, sticking to the GOP’s hardline flat tax agenda and free market ideology. 

Republican National Convention Platform Committee voted against preserving the mortgage interest tax deduction on Aug. 20, 2012. SOURCE: C-Span.org

The RNC’s Subcommittee on Jobs, Economy, and Debt had called for a comprehensive tax reform to create a “simpler, transparent, flatter, and fairer tax system.”

Read more: Transcript: Republican National Convention platform statement on economy, jobs & debt

The Republican’s approach would involve broadening the tax base to lower overall tax rates, particularly for those in the top income bracket. If adopted, individuals who earn more than $388,000 a year could see their tax rate reduced by 10%, from 35% to 25%.

But ‘flattening’ the tax code would require eliminating the complex web of tax deductions and credit such as the mortgage interest rate deduction, which allows homeowners to reduce their taxable income by the amount they paid for the interest of their mortgage and thus lowering the amount they have to pay in taxes.

For example, if a homeowner pays $2,250 for his monthly mortgage payment, of which $112.50 goes to servicing a 5% interest rate, then he’ll be able to deduct $1,350 from his total taxable income that year, saving the homeowner hundreds of dollars in federal income taxes.

Read more: Federal Reserve: Americans lost one-third of wealth during Great Recession

To avoid raising taxes on millions of middle-class homeowners and hurting the fragile housing and economic recovery, a delegate from Kentucky proposed a one-sentence amendment to the RNC’s tax policy: “We must preserve the mortgage interest deduction.”

“I believe that this particular amendment…shows the Republican Party’s policy of supporting the middle-class, of supporting the uplifting of those who would like to enter the middle-class,” said John Sigler, a Delaware delegate and the state’s GOP Committee Chairman. “This sends a very, very important policy statement to the rest of the nation as to what exactly the Republican Party stands for.”

The amendment was overwhelmingly voted down by the RNC Platform Committee.

The amendment’s failure underscored the conflict between the Republican Party’s stubborn limited-government-free-enterprise ideology and the reality of the practical government policies that do promote economic growth and that benefit a significant portion of the GOP’s middle-class constituents.

Read more: CBO blames high unemployment on weak consumer spending

Delegates who supported the amendment argued that preserving the mortgage interest deduction is necessary to help the housing market recover given the tougher lending environment following the 2008 financial crisis.

“This is the last vestige of why people would want to be interested in buying a home,” said April Newland, a delegate from the Virgin Islands who is a real estate broker for 30 years. “The mortgage interest deduction is paramount to the real estate industry, the homebuilders’ industry, home buyers and sellers across the country.”

In addition, getting rid of the popular tax incentive for people to purchase homes could further depress home prices (and home values) since the long-term costs for prospective home buyers would be higher. And since local property taxes are largely determined by home values, eliminating the mortgage interest deduction could mean less tax revenues for counties, cities, local communities, and schools.

“In Ohio, our school system is largely dependent on dollars raised from property taxes so we have a great interest in ensuring that there is incentive to purchase homes. It contributes to our overall economy. There’s great benefit to it,” said Clarence Mingo, Franklin County Tax Assessor and a delegate for the Buckeye state.

Opponents of the amendment argued that there should not be any exceptions to eliminating all tax deductions and credits as part of the Republican’s plan for comprehensive tax reform.

“[The] comprehensive tax reform that we’re talking about, that we stand for, means the entire thing gets re-done from the ground up,” said Kevin Erickson, a delegate from Minnesota. “And if it’s a fair flat tax, then we don’t need the deductions.”

Erickson’s statement was delivered without any trace of irony to the fact that, just minutes earlier, the same Platform Committee voted unanimously to preserve the tax deduction of donations given to religious organizations and charities.

 

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4 Comments on “Republican National Convention 2012: Platform Committee voted against preserving the mortgage interest tax deduction

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