Ensuring Tax Reform Does Not Kill the Homeownership Dream

We support a North Carolina where businesses, small and large; schools and universities; and citizens can thrive. But, the following statement from NAR’s Federal Tax / Tax Reform Issue Summary states, very succinctly, the disadvantages of tax reform:

Tax reform carries high stakes for real estate professionals and those who own real estate. The current system is very efficient and generally favorable for real estate. Alterations to that system would change – likely to the detriment –the economics of homeownership and of real estate investment. Any modification of real estate-related tax benefits in the current fragile economy could do serious damage and will certainly create uncertainty for prospective purchasers.

Also, tax reform based on a goal to lower the tax rates as much as possible could mean that policy makers ignore the societal and economic benefits of important and long-standing deductions, such as the mortgage interest deduction, in favor of reaching the ultimate low tax rate. While lower rates could help take some of the sting out of lost tax benefits, and generally be positive for the economy, the trade-offs would create many winners and losers among individuals, businesses, and entire industries. There is no assurance that tax reform would result in a net positive for real estate or for the economy. Indeed, the real estate sector could take a big hit, as it did in 1986, the last time tax reform was successfully undertaken.

NCAR has been working around the clock to ensure that tax reform does not damage the recovering, but still fragile, real estate market in North Carolina. President Patrice Willetts, Legislative Chairman Mark Zimmerman, our leadership team, our local association AEs and staff members, NCAR staff and, in particular, Cady Thomas, NCAR’s lobbyists and consultants and our wonderful members have all pitched in to ensure that tax reform does not kill the dream of homeownership in North Carolina. I cannot possibly express better why the fight is so important than to republish Mark Zimmerman’s comments delivered in writing to our legislators (see letter on page 29).

This has been one of the hardest fought battles in my tenure with the REALTOR® family, dating back to 1995. We are continuing the fight and may very well have to come back to fight the fight another year. Many of the original tax proposals adverse to property ownership have been defeated (e.g., real estate transfer tax, tax on services impacting the real estate industry, application of the franchise taxes to LLCs). This is a huge victory for North Carolina, its citizens and NCAR. But, we are not yet ready to declare this victory and go home. As long as a limitation on mortgage interest and property tax deductions are being proposed and discussed we will remain vigilant on behalf of all our members and property owners in North Carolina. We will continue the good fight. Please join us and answer our Calls for Action. This is for your future; this is for the future of North Carolina.

Dear Members of the North Carolina House of Representatives,

I want you to think hard about your decisions on reforming the North Carolina tax code. I‘m concerned about shifting the tax burden on homeowners by curtailing the Mortgage Interest and property tax deductions. Home ownership is important to growing family wealth, creating more stable communities and bolstering North Carolina’s economy. Home ownership is something tax policy should encourage. Therefore, quite frankly, I’m dumbfounded why legislators would place an artificial limit on that goal. Good government policy supports home ownership. You must not compromise that principle. You must be fully committed.

For exactly 100 years, since the very first federal tax code, mortgage interest has been a centerpiece of gov- ernment policy. So much so that in 1982, when my former boss, President Ronald Reagan, took on the same hard task of tax reform that you are grappling with, he personally insisted on retaining the Mortgage Interest Deduction. In a speech in 1982, he said:

“In America, private ownership has been the bedrock of our social system. Let me state, categorically, that for this administration, housing is one of our highest social priorities. Our policies for this industry are based on the essential right to private property. And in private property, nothing is more important than home ownership. I also want to state my firm, personal commitment to preservation of the homeowner mortgage tax deduction.” Reagan understood how important home ownership is to our American way of life, and though he fundamen- tally changed our tax system, he preserved the Mortgage Interest Deduction. In fact, over the past century, wherever there’s been a Mortgage Interest Deduction, it’s never been limited by a legislature – until now, here in North Carolina

You understand how this works. If North Carolina compromises, then all the cash-starved states will pounce on this homeowner deduction – and so eventually will a cash-starved Congress. Your vote will begin the abandonment of support for home ownership. Do you really want this to be your legacy?

If you believe in promoting home ownership, you must not compromise with some arbitrary cap. You must stand firm in saying we need tax reform and need to reaffirm the 100 years of good tax policy unconditionally supporting home ownership

We must also preserve the property tax deduction. Local taxes are a huge burden that will only grow worse. Homeowners currently shoulder half the cost of local government through property taxes. They are doing more than their fair share. By stripping them of this deduction, you will devalue families’ homes and discourage homeownership.

To the Republicans in the House: I ask you to “win one for the Gipper” and the principles he fought for, to keep our American society strong.

To both parties: I ask you to win one for your constituents, the 2,958,000 home-owning families in North Carolina.

You must only support tax reform with the full Mortgage Interest Deduction and the property tax deduction. Otherwise, you will compromise the principles you agree on and create tax policy that would lead North Carolina into a worse state in the future.

Sincerely,

Mark Zimmerman

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