Cap on mortgage deductions is back in House tax bill

jfrank@newsobserver.comJune 5, 2013 

Rep. Julia Howard

MLEWIS

— For the second straight day, House Republicans feuded among themselves on a major tax cut measure, stalling a top legislative priority.

But 10 hours after a revolt in a morning committee meeting, House GOP lawmakers emerged from a lengthy closed-door meeting to say they had reached a consensus to remove language from the tax bill aimed at helping the housing industry.

The move puts the House tax plan back roughly in its original form. It proposes to increase the standard deduction but cap itemized state deductions for mortgage interest, charitable contributions and property tax to $25,000 for a married couple filing jointly.

With bipartisan support, Rep. Julia Howard, a senior GOP leader and real estate agent, had removed the deductions cap from the bill on Tuesday. But House Speaker Thom Tillis led an effort to reverse course Wednesday in a hastily called Appropriations Committee meeting.

House leaders were concerned that the additional deductions would add about $500 million to the cost of the bill, bringing the total in lost tax revenue to $1.5 billion over five years. The lost revenue would have an effect on the budget House lawmakers are currently drafting.

Tumult in the House

But an effort to remove Howard’s amendment sparked an uprising Wednesday morning. An unusual cadre of Democrats and some Republicans joined forces to block the rewritten measure from even being considered.

State Rep. Nelson Dollar, a Cary Republican, tried to strong-arm the measure through the committee, but it failed on a chaotic 34-44 vote. It split Republican leaders with Tillis watching from the sidelines in a rare appearance at a committee.

To reach a compromise, GOP lawmakers huddled for hours in two meetings to ease one of the most visible fissures among the members of the majority party this session.

Jordan Shaw, a spokesman for the speaker, said the Republican caucus decided to return to the original bill in its meeting. Howard, the amendment sponsor, did not attend. The bill is likely to resurface this week to make the changes and eventually make its way to the full House.

A separate Senate bill to revamp the tax system also is stalled.

“Tax reform is a complicated issue,” Shaw said Wednesday evening. “We have a big caucus, so it’s a part of the process. The process worked.”

Effects on housing

Mark Zimmerman, a local real estate agent, said the mortgage deductions help boost housing prices, a key economic indicator. The National Association of Realtors says the majority of those who claim the mortgage interest deduction nationwide earn between $60,000 and $200,000 a year.

“When the House plan came out, it, for the first time, put a constraint on this legacy of promoting homeownership through tax policy,” he said. “What we don’t want to see is it begin to be eroded here.”

But other studies suggest the positive affects of the mortgage tax break are less profound. More than 70 percent of taxpayers take the standard deduction and don’t receive the tax break, legislative fiscal staff told lawmakers, so only those who itemize see the benefits.

Frank: 919-829-4698

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