President Barack Obama's latest attempt to reduce some tax deductions on mortgage interest and charitable contributions reportedly is failing to drum up any support on Capitol Hill.
The president has been trying to convince investors and the general public that the country is slowly emerging from the recession, but the threat of home foreclosures and a faltering housing recovery has been looming over the economy.
Obama's budget blueprint, released in February, suggests lowering deductions for mortgage interest, real-estate taxes, charitable contributions and other items for married couples with annual incomes of more than $250,000, or individual filers earning more than $200,000. Such taxpayers would save 28 cents of tax liability for every $1 of mortgage interest or other eligible expenses, down from 35 cents now, according to the plan.
However, the proposal has yet to win significant backing in Congress, The Wall Street Journal reported.
Members from both political parties are concerned about how the plan would affect both the housing market and charitable contributions, Matthew Beck, a spokesman for the Democratic majority on the House Ways and Means Committee, told the Journal.
The White House thinks the plan will help to slash the massive U.S. deficit and "distribute the cost of government more fairly among taxpayers of various income levels," a Treasury spokeswoman told the Journal.
Real-estate industry lobbyists contend that curbing the deduction will hurt demand for homes in the housing market’s already shaky recovery. "It seems very counterintuitive to impose this kind of pain on an industry that's already suffering more than any industry in America," Jerry Howard, chief executive of the National Association of Home Builders, told the Journal.
Lucien Salvant, spokesman for the National Association of Realtors, says the plan "amounts to a tax increase on an important group of homeowners and would rob buyers of the incentive to move up in the housing market," the Journal reported.
Congress has rejected many attempts to scale back or eliminate this deduction, which has been available since the federal income tax was created in 1913, the report said.
The news comes as Obama also reportedly is considering stopping all home foreclosures unless they have been rejected by the administration’s struggling $75 billion mortgage assistance program.
Republicans have been taking aim at Obama’s mortgage assistance program. Republicans argue the effort is making the economic crisis worse and say many homeowners would be better off as renters.
Meanwhile, sales of previously owned homes plunged in January to their lowest level since summer, recently providing fresh evidence that high unemployment and tight lending standards are outweighing the government's attempts to prop up the housing market.
The results, the weakest since June, were far worse than forecast and suggest the housing recovery will sputter without government support.
The government has spent billions to keep mortgage rates low and give buyers tax breaks, but both programs are set to end this spring.
"Most of the improvement that we've seen in housing over the past year has been tied to some sort of stimulus program," Wells Fargo economist Mark Vitner told the Associated Press. "Now that we're seeing those programs wind down, we're seeing that housing is quite a bit weaker than many people had thought."
Consumers are nervous about the shaky economy and face tough hurdles in trying to qualify for home loans, said Danny Frank, an agent with Keller Williams Realty near Houston, Texas. "People are scared right now," he said.
The National Association of Realtors said Friday that home sales fell 7.2 percent to a seasonally adjusted annual rate of 5.05 million from a downwardly revised pace of 5.44 million in December. Economists expected a slight increase to a rate of 5.5 million.
Home sales have been sluggish this winter because the deadline for a tax credit for first-time buyers was extended. It had been set to expire on Nov. 30, causing sales to surge last fall. Then Congress extended the deadline until April 30 and expanded it to existing homeowners who move.
Analysts say the extended credit isn't having much impact so far.
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