Obama panel rejects debt deficit proposal, mortgage tax deduction limit

by JON PRIOR

President Obama's commission voted 11-7 against a proposal Friday to cut nearly $4 trillion from the U.S. deficit with measures such as limiting the mortgage-interest tax deduction.

The proposal needed approval from 14 of the 18 lawmakers on the National Commission on Fiscal Responsibility in order for it to reach Congress, but it only received 11 votes. Those in favor of the proposal were starkly bipartisan with five Republicans, five Democrats and one independent voting in favor.

The commission proposed the mortgage-interest tax deduction to be limited to principal residences only and eligible mortgages be capped at $500,000 instead of the current $1 million cap. It also proposed a 12% nonrefundable mortgage-interest tax credit for all taxpayers.

But the industry reacted immediately and strongly, condemning any consideration of limiting one of the biggest incentives for purchasing a home at a time when the market sorely lacked demand. The National Association of Realtors said any changes would have pushed home prices down another 15%.

Sen. Richard Durbin (D-Ill.) who voted in favor of the proposal admitted it called for stark changes.

"I think the cuts in this proposal are too deep and too fast," Durbin said.

Sen. Michael Crapo (R-Idaho) said the plan deserves "immediate and aggressive" attention from Congress.

"The fact that we did not hit 14 should not be an indication that there is not powerful support behind this plan," Crapo said.

Rep. Xavier Becerra (D-Calif.) who voted against the proposal also called for further action.

"The last chapter has not been written. I hope that one of the chapters in this book on fiscal and financial responsibility target that which got us into this mess," Becerra said.

Erskine Bowles, the commission's co-chairman and former chief of staff to President Clinton, also said further work would be done.

"This report is merely the first step," Bowles said.

URL to original article: http://www.housingwire.com/2010/12/03/obama-panel-rejects-debt-deficit-proposal-mortgage-tax-deduction-limit