Besieged by complaints about the complexity of tax laws, Congress is trying to figure ways to simplify federal income tax forms. But members will be in serious trouble if they accept suggestions by tax advisers that would lead to a smaller write-off for home mortgages.
No more sacred tax cow exists than the deduction for interest paid on home mortgages. When the possibility of reducing or eliminating the mortgage deduction was raised during debate leading to tax reform legislation in 1986, the resulting outcry had Congress running for cover.Under the 1986 law, deductions for interest paid on consumer purchases were targeted for gradual elimination. After this year, no consumer interest, including auto loans and credit cards, can be deducted. But interest on home mortgages can still be claimed in full as a tax write-off.
That's as it should be. The government encourages homeownership for the stability it brings to society. There is a clear public interest here. Putting limits on that tax deduction would work against homeownership.
One proposal offered by the staff of the House Ways and Means Committee would lump all interest paid - mortgage and consumer alike - and then allow deduction of a percentage of the total, say 75 percent.
That would both simplify the tax forms and give an interest deduction to non-homeowners who are being frozen out in the tax deduction area. Homeowners have an added advantage in that they can borrow money on home equity for consumer purchases and still deduct the interest.
While that sounds fair, it would take a bite out of the formerly untouchable home mortgage deduction. And once that nibbling process begins, who knows where it will end?
It's no secret that the tax code is too complex. The complexity hurts business and productivity. An army of accountants and tax lawyers are kept occupied in efforts to cope with the tax maze.
By all means, tax simplification ought to be encouraged. But in the reasonable urge to simplify, let's not undermine the traditional support the tax code gives to the laudable goal of owning a home.