Preserving the American Dream of Home Ownership
Californians would bear the brunt of higher taxes on middle-class homeowners under a White House panel's plan to severely curb mortgage interest deductions.
The nine-member President's Advisory Panel on Federal Tax Reform recommended limiting the mortgage deduction as part of a proposal ostensibly designed to streamline the current income tax code.
It is not fair to pile a bigger tax load on the backs of middle-class homeowners in the San Fernando Valley in order to preserve tax breaks President Bush has given to the wealthiest Americans.
Under the home mortgage proposal, the deduction would be turned into a credit equal to 15 percent of the mortgage interest paid. The current $1 million limit on mortgages eligible for the tax break would shrink to a national average of roughly $300,000.
In the San Fernando Valley, the median price of a previously-owned home sold in September was $590,000, according to the Southland Regional Association of Realtors.
So virtually all Valley homeowners would see the value of their home mortgage deduction decline, and those with mortgages between $300,000 and $1 million would be hit hardest.
In another sharp blow to California taxpayers, the panel urged repealing the federal deduction for state and local taxes. That proposal would cost Californians $13 billion more a year in federal taxes, California Treasurer Phil Angelides has estimated. Taking away the federal deduction would be a bitter pill for Californians whose state income tax rate is one of the highest in the country. It would cost Californians more than taxpayers from just about anywhere else.
A tax overhaul package that preserves tax cuts for the top 2 percent of Americans is expected to top the Republican congressional agenda next year. The White House and Republicans on Capitol Hill want a tax hike on people who work so they can preserve tax cuts for people with real wealth.