Extension of Mortgage Insurance Deduction: Unpublished Letter to Oregonian Editor.

[Link Correction]
I sent this letter on Thursday December 27th to the Letters to the Editor at the Oregonian. I expect it will not be published.

To the Editor:

Today's editorial Gordon Smith on the Home Front (HERE) lauded Senator Smith for passage of an extension of the tax deductibility of mortgage insurance premiums. The editorial projected that 90% of the Oregonians would be income eligible for the deduction. There are two problems I see with your endorsement of this costly revenue reducing tax provision.

1. The deduction is NOT targeted. Whether good or bad, the SCHIP child health insurance debate helped to focus attention on income targeting. This deduction is NOT targeted and would allow homeowners with income in excess of $100,000 to claim the deduction (phase out begins only at $100,000 of adjusted gross income for married couples). Up to the phase out levels, the higher the income and the higher the cost of mortgage insurance/more expensive the home, the higher is the potential cost to the government in lost revenue. (The 90% of Oregonians cited as income eligible in the editorial is meaningless—renters can't claim the deduction, and only those owners who pay mortgage insurance AND who itemize the deduction will be able to take the deduction on their federal tax return). See this Tax Foundation Fact sheet (http://www.taxfoundation.org/files/ff49.pdf) for more information on who benefits from the home mortgage interest deduction.

2. The Cost for this Additional Home ownership Subsidy Is Not the Highest Housing Priority. The Congressional Budget Office projects that the cost of the mortgage insurance provision will be $570 million dollars over the next 10 years. (See CBO cost estimates for H.R. 3648 found at http://www.cbo.gov/ftpdocs/86xx/doc8667/hr3648.pdf). With the current federal revenue loss from property taxes, mortgage insurance, and gain on sale estimated at more than $120 BILLION a year [see footnote at the bottom page 17 of the Congressional Research Service analysis of H.R. 3648 found at http://assets.opencrs.com/rpts/RL34212_20071206.pdf) and with other housing programs facing budget cutbacks, adding yet another additional subsidy without significant income targeting for home ownership cannot be the highest housing priority facing our country.