NAR Insists Mortgage Interest Deduction be Saved (so it Probably will be)

The life or death of the mortgage interest deduction (MID) is a perennialrnWashington, DC soap opera.  The prospectrnof eliminating it is always on the table early in any discussion of budget cutsrnor of revisions to the tax code yet, like Little Nell on those railroad tracks,rna hero in the form of multiple real estate industry lobbying groups, alwaysrncomes to the rescue.  </p

Yesterday Chief Economist Lawrence Yun penned an op-ed for the NationalrnAssociation of Realtors® (NAR), one of MID’s biggest champions, extolling thernvalue of the deduction.   In his piece, which appeared on the NARrnwebsite, Yun put forth the usual arguments in its favor.   </p<ul class="unIndentedList"<liThe tax savings make the costs of carrying arnmortgage possible for many families;</li<liOwning a home means gaining a foothold into thernmiddle class;</li<liUnlike the rich who whose wealth is tied tornother investments, that of most middle-class Americans is tied to their homes;</li<liThe nation's homeowners already pay 80 to 90rnpercent of U.S. federal income tax</li<liEliminating the MID at a time when the housingrnrecovery is just gaining a solid footing could slow sales, lower prices, andrnerode much of the wealth that has recently been recovered through home equity;</li<liHome sales account for about 2.5 millionrnAmerican jobs.</li</ul

Actually the fate of MID has come up only sporadically in recent months asrntax reform has been overwhelmed by other capital madness but the Ryan Budgetrndid recently resurface.  The pre-2012rnelection analysis of that budget, and Ryan’s plan to offset the massivernhigh-earner tax credits it contains, always brought up a prominent group of whatrnare called “tax expenditures,” that is tax credits and deductions.  MID is the second largest of these (after thernexclusion of employer paid health care from earned income calculations) and is projectedrnto cost the government $113 billion in 2015. </p

With budget battles about to get even more intense, this is a timely reminder on an issue that’s likely to come up in coming weeks.  Is the gathering storm reason enough to trigger Yun’s entreaties?  Probably.  Or maybe there is something elserngoing on behind the scenes that the rest of us are not aware of – but insidersrnare.  And there is no bigger Washington insiderrnthan NAR. </p

While its membership declined following the housing crash it is recoveringrnand NAR refers to itself as one of the largest trade associations in the U.S.,rnrepresenting one million members in the real estate industry.  Its maintains an advocacy staff of 39 withrnmost having responsibility for several of some 80 regulatory, tax,rnenvironmental or credit related issues in which the association has anrninterest..  These range from thernAffordable Housing Trust Fund, bankruptcy and estate tax, and credit reform tornQualified Mortgages and visas for seasonal workers.</p

NAR’s advocacy includes tracking legislation, giving testimony to House andrnSenate committees, writing letters to members of Congress and variousrngovernment agencies.  And money.  Lots and lots of money.</p

Open Secrets.org (the Center for Responsive Politics), which tracksrnlobbyists and political action groups says that NAR is one of the biggestrnspenders on industry advocacy and made one of the biggest increases in that spendingrnin 2012.  In mandatory reports filed withrnthe House and Senate, NAR and its subsidiary the California Association ofrnRealtors® said it spent $41.5 million on lobbying in 2012, a new record and 19rnmillion more than it spent in 2011. It has spent $17.68 million thus far inrn2013.  </p

NAR contributed over $14 million to political candidates in 2012 to rank 13^{th</supout of 21,002 donors tracked by Open Secrets and did $8.2 million in outsidernpolitical spending.  Contributions tornmembers of the House and Senate ranged from $15,000 given to each of eightrnmembers of the House and one senator and $10, which we would guess was thernequivalent of a lump of coal, given to eight senators and one representative.   Open Secrets classifies NAR as a "fencernstraddling" contributor but it appears that more of the larger donations wentrnto Republicans than Democrats. </p}

Of course NAR isn’t the only heavy hitter in the industry, though the othersrnare far down the list.  The NationalrnAssociation of Home Builders spent $2.37 million on lobbying to rank 236 out ofrn4369 registered lobbyists and contributed 3.42 million to candidates to rank 87^{th</supamong contributors.  A 2012 search didn'trngarner information on the Mortgage Bankers Association but it has spent 1.7rnmillion on advocacy thus far in 2013.</p}

The bottom line is this: money talks in Washington.  With a million members and $42 million to spend NAR is definitely a political force.  Given its stated objectionrnto any repeal of the MID, chances are good it will be around for a while.</p

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