Don’t penalize homeowners
On paper, the key promise of a higher standard deduction looks simple: tax savings for middle-class families.
In reality, there’s a homeowner tax hike hiding in plain sight.
The recent tax-reform framework doubles the standard deduction from $6,350 to $12,000 for single filers, and from $12,700 to $24,000 for joint filers. The proposals pay for this higher standard deduction, in part, by eliminating the personal exemptions currently in the tax code.
The smallest families might do well under such a proposal, but it poses a threat to others. The result is a likely tax increase on millions of middleclass homeowners, who take advantage of current-law incentives for homeownership.
You read that correctly: A large number of middle-income Americans will see a tax increase. That’s too high a price to pay for limited “simplification” of the tax code.
In addition, the near doubling of the standard deduction means all but the top 5% of American tax filers won’t itemize. That nullifies the incentive effect of the mortgage interest deduction and essentially ends a century-long tradition of encouraging homeownership through the tax code.
Additionally, tax filers will still need to calculate whether or not to itemize, eliminating a great deal of the simplification promised by the higher standard deduction.
Everyone wants lower taxes, and Realtors are strong believers in lowering rates when done in a way that’s fiscally responsible and makes sense. Saddling homeowners with a larger tax bill, or picking winners and losers between families, does neither.
William E. Brown is president of the National Association of Realtors.