On June 19th my local newspaper, The Signal, published an opinion letter by Thomas Oatway entitled “Legislators must stand up against potential tax reform threats” (Link). In that letter Thomas urged Congressman Steve Knight and other California Republicans to “fight to derail this plan”, and I want to add my voice to that chorus.
As Oatway correctly pointed out, eliminating the federal tax deduction for home mortgage interest and property taxes will have a very negative impact on home ownership, particularly for the middle class.
Why would the GOP be so stupid as to eliminate the deductions that their natural base depends on? It would be electoral suicide.
Congressional Republicans promoting this plan claim that by increasing the personal exemption and decreasing the number of brackets, these eliminations will be essentially “harmless”, and they’ll still be there for people who elect to itemize their deductions.
But eliminating the mortgage and property tax deductions is going to immediately cause home values to drop (http://www.businessinsider.com/gop-tax-plan-could-affect-real-estate-market-2017-1). Who owns most homes numerically? The middle class, the exact same demographic from which the GOP draws most of its support.
So, as those people sit there, with their ongoing mortgages and property taxes, they’re going to see the value of their homes drop out from under their feet.
Then there’s the secondary, or ripple, effect. As home values drop, so do rental values. So, those who own investment properties are going to see their income decrease as rental incomes chase property values down. That’s a direct effect on income for those people.
As a homeowner, I’m looking at personally losing almost $50K in hard equity from my house. Why would I think that’s any kind of good idea at all? That’s exactly the same thing as taking $50,000 out of my savings account. Why would I vote for someone who wants to do that? I may as well vote for a Democrat!
Who actually benefits from this? People who can’t afford to buy homes, or others who are renters, and I’d guess the majority of them are people who support Dems.
So in reality, the GOP will manage to alienate middle class home owners and investment owners, their natural base (as I said), while providing a benefit for people who are never going to vote for them anyway.
In what alternate universe does that sound like a good idea?
©Brian Baker 2017
(Also published today in my local newspaper The Signal)