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Click Here Click Here Press Release Source: National Association of Realtors Realtors Raise Alarms Over Real Estate Tax Proposals Monday October 31, 5:06 pm ET SAN FRANCISCO--(BUSINESS WIRE)--Oct.
Click Here The value of the nation's residential property could decline 15 percent o r more if President Bush's tax reform panel's expected recommendation to convert the mortgage interest deduction (MID) to a tax credit takes eff ect, according to preliminary projections by NAR's Economic Research Div ision. The housing sector accounts for about 15 percent of the nation's Gross Domestic Product. Eliminating the tax deduction for second homes, another proposal under co nsideration, would impact at least 5 percent of the GDP. Second homes ac counted for 36 percent of all home sales last year. The panel, which is expected to make its final report to the president to morrow, is considering recommending that Congress convert the MID from a deduction to a tax credit; is also considering reducing the $1 million cap on mortgages to the local FHA loan limit (which can be as little as $170,000 and no more than $312,000 in high cost areas such as Alaska, Ha waii, Guam or the Virgin Islands); repealing the deduction for property taxes, as well as other state and local taxes; and raising the amount of gain to be excluded on sale of a principal residence but reducing the f requency in which the exclusion can be taken. "Before these ill-considered proposals become official, we are raising th e loudest possible alarms over their prospective economic impact. "We are concerned not just for the housing economy but for the nation's e conomy as a whole. Not only do the recommendations being considered by t he panel have the potential to impact the value of every home, whether i t has a mortgage or not, but also they will drive down real estate value s Consumers' nest eggs will be jeopardized because much of investment f or retirement is tied to the equity consumers have in their home," he sa id. Stevens said the Tax Reform Act of 1986 demonstrated that when the tax be nefits associated with real estate ownership are curtailed, the value of real estate declines. The resulting loss of value in the commercial rea l estate sector was 30 percent following passage of that legislation. They are bad for ho meownership, bad for real estate and bad for the American economy. NAR w ill vehemently oppose them should they be considered by Congress," Steve ns said. NAR's board today funded new research to determine the economic effect of the panel's recommendations, especially their impact on the value of re sidential and commercial real estate, and assess their impact on homeown ership. The NAR urges that real estate be recognized as a long-term investment, s o the tax system should reflect the stream of income and expenses associ ated with long-term investments. Deductions for the amount of the purcha se price and the loss of interest deductions are ill-advised for real es tate investments. NAR also urges that the president and Congress preserv e the deduction for state and local taxes, including property taxes. A workable tax system should treat home ownership as investment not consu mption; encourage savings a and tax-based incentives for home purchases; eliminate penalties for using savings for home purchases; and treat ser vices associated with the purchase of real estate as part of the investm ent cost of the transaction, and not tax those services. In other action, the board recommended that the federal government not es tablish criteria for the use of eminent domain by state and local govern ments. Each state should establish its own rules and laws governing emin ent domain without interference from the federal government. The board met on the final day of the 2005 REALTORS Conference & Expo, O ct. The National Association of Realtors, "The Voice for Real Estate," is Am erica's largest trade association, representing more than 1 million memb ers involved in all aspects of the residential and commercial real estat e industries.
This an d other news releases are posted in the Web site's "News Media" section in the NAR Media Center. REALTOR is a registered collective membership mark which may be used onl y by real estate professionals who are members of the NATIONAL ASSOCIATI ON OF REALTORS and subscribe to its strict Code of Ethics.
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