Americans love the exemptions and loopholes in the U.S. tax code -- especially the one about the home-mortgage interest deduction. This prized tax break allows taxpayers to deduct the interest they pay on mortgages of up to $1 million.
But since the subprime-mortgage bust, it's become harder and harder to justify a write-off of interest on a $1 million mortgage by a millionaire who is also getting a break on his ski house. Enter two of the chairs of the National Commission on Fiscal Responsibility and Reform, which was created by President Barack Obama: Erskine Bowles, left, and Alan Simpson, right.
"The deficit and debt is like a cancer, and it's going to destroy our country from within," says Bowles says.
The business has joined Simpson, the former Wyoming senator, in proposing to put a limit on the deduction at $500,000 and not allowing deductions for a second home.
Opposition is sure to be fierce, says Richard Guardino, dean of the Wilbur F. Breslin Center for Real Estate Studies at Hofstra University. "The home interest deduction is critical to Long Island because of the high housing costs," he says. "Eliminating it would depress home values and at the same time make more homes unaffordable. It would also depress the second home market on eastern Long Island."
Recent polls in the homebuilding industry show that almost 80 percent of the public wants to keep the tax break as it is. And the National Association of Realtors -- which has spent more than $20 million lobbying Congress last year -- warn of a 15 percent drop in home prices if the deduction is scaled back.