Northwestern professor thinks Mortgage tax credit should be abolished. Is he crazy?

by Joe Sesso on September 21, 2011

It doesn’t take a genius to realize that the real estate market has been hurting for some time now. Despite low interest rates, great deals, and lots of inventory, houses are not selling. Experts predict years (like 2014) before we even begin to see  a light at the end of the tunnel. Yet with all this turmoil in the housing market, there are some “experts” who think that the Mortgage Tax credit should be abolished from U.S. tax returns. One of these so-called geniuses is Northwestern University business professor Robert Gordon.

In the September 18 Business Section of the Chicago Tribune, Kristin Samuelson did an opinion piece on recent comments by Warren Buffet about high net worth individuals paying more taxes.  When asked how he would close the debt gap in the U.S., Gordon said he would, “raise taxes on millionaires and billionaires and eliminate ‘tax loopholes’ like the residential mortgage deduction.” It’s a good thing he’s not running for office, because he has no clue about how beneficial the homeowner tax deduction really is.

While it’s true that eliminating this deduction would save the government billions, it would do so at the expense of hard working homeowners. Homeowners over the past decade have had to deal with massive losses in equity, upside down mortgages, and foreclosed homes engulfing their neighborhoods. Do they really need this? Isn’t this kind of like “putting salt in the wounds?”There are many other ways to reduce the deficit without hurting homeowners.  This kind of talk is dangerous because it comes from a respected professor from one of the top business schools in the country. Not only do I believe that it reflects bad on the University, but it also makes us wonder how guys like that got where they are. Professor Gordon needs to get out of his office and go to a residential neighborhood that has been devastated by the foreclosure crisis. They aren’t hard to find these days. He needs to walk the streets and speak with homeowners about what their future plans are for the neighborhood. Without the homeowner tax credit, what incentive do homeowners in these neighborhoods have to stay in a house that isn’t worth the mortgage they’re paying on it? Think about how many Americans currently live in homes that are not worth what they’re paying on it. Why do they stay there? Many stay because they take pride in their home and their neighborhood. They want to prevent a domino effect of foreclosures and vacant homes in their neighborhoods. They do this by deciding to stay and pay on an upside down mortgage. Don’t you think that they should at least enjoy some type of tax credit by doing the right thing? For all his knowledge, Gordon doesn’t have a clue as to what’s really going on in the housing market. I think many elected officials might not know either. That’s a scary thought.

So what can be done when individuals (both elected officials and prominent citizens) talk like this? The biggest fear people have is that crazy talk like this gains momentum and becomes a bill being considered in Congress. What needs to be done is that Realtors, mortgage brokers, and concerned citizens need to contact their legislators and urge them to vote “no” to bills like this. Realtors and mortgage brokers also have Political Action Committees (PACs) to fight for homeowner rights.

While there has been talk of abolishing the Mortgage Tax Credit, up to this point it has been only talk. Don’t be surprised if a bill becomes introduced trying to abolish this much-needed credit. If it does, we all need to take a stand and do something about it.

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