As homeownership rates across the country decline and the middle class shrinks, some members of Congress are looking to nullify home ownership incentives.
If a tax on homeownership passes, America’s households will lose out on hundreds of thousands of dollars of net-worth, neighborhoods will be weakened, and we will continue to see the middle class decline. Consider some of the realities about owning a home and why Congress should keep a tax incentive to encourage homeownership.
Reality No. 1: Owning a home is one of the best ways to build long-term wealth, providing both equity accumulation and tax benefits over time. In 2013, the median net worth of homeowner families was $195,400, while the median net worth of renters was $5,400, according to the Federal Reserve. Minorities struggling to get on the housing ladder will also find themselves at a disadvantage, further widening the wealth gap.
In 2013, the median net worth of homeowner
families was $195,400, while the
median net worth of renters was $5,400.
Reality No. 2: There’s no debating that homeownership strengthens communities, encourages higher civic participation, boosts children’s educational performance, lowers crime rates, and improves health-care outcomes. Moreover, homeowners bring more stability to neighborhoods because they tend to move less often.
Reality No. 3: Homeownership helps provide predictability. Individuals can enjoy steady and consistent housing costs thanks to the tax incentive that allows them to own a home. That’s because a fixed-rate mortgage payment might not change for 15 to 30 years, while rents typically increase 2 to 3 percent a year.
Reality No. 4: The deduction of state and local taxes (such as property taxes) prevents double taxation. You as a taxpayer do not enjoy the use of money paid to state and local taxes. Therefore, the federal government allows you to deduct these from your federal income taxes. Eliminating this benefit will penalize California more than other states because of our high home prices and high tax rates.
Reality No. 5: Home sales in this country generate more than 2.5 million private-sector jobs in an average year. For every two homes sold, one job is created. Any change that would make home buying less attractive will be detrimental to the housing industry and the nation’s economy.
Unless today’s lawmakers resist the temptation to change or eliminate the impact of homeownership tax incentives, the impact will be felt by tens of millions of people who own, or want to sell or buy a home. The potential ripple effect should not be underestimated. Since housing is widely regarded as a key economic driver, such actions could drive the country back into recession.
Not encouraging homeownership through the tax code and eliminating the property tax deduction is a de facto tax increase on homeowners and the middle class. If the White House truly wants to help working-class citizens seeking the American Dream, then it is imperative to maintain a tax incentive for homeownership and protect Californians against double taxation.
We can’t allow tax reform to become a tax on homeownership.