Congress considers changing mortgage interest deduction

Rep. John Dingell (D-MI) has plans to introduce legislation that would remove mortgage interest deductions for certain homeowners, citing a need to penalize taxpayers who consume too much energy.

Dingell is drafting an energy-saving bill that is expected to include higher federal gasoline taxes and other provisions for discouraging people from adding carbon emissions to the atmosphere. Among the provisions expected to appear in the bill is the removal of the mortgage interest deduction for homeowners with houses of more than 3,000 square feet of interior space. His bill will be introduced when Congress reconvenes in September.

Dingell and many environmentalists claim the houses, often referred to as "McMansions," consume an unreasonable amount of energy due to the amount of space that needs to be heated and cooled. In addition, proponents of the bill complain about the amount of construction materials needed to build the bigger houses. Another complaint is that many of these homes are being built farther and farther away from cities, adding to urban sprawl, increasing the need for longer commutes and thus adding to traffic congestion and carbon emissions from commuting automobiles.

Real estate professionals are preparing to counter the need for this legislation with arguments that the new homes about which Dingell complains are often more energy efficient than older homes, built closer to the cities.

Bill Kilmer, executive vice president for advocacy at the National Association of Home Builders, recommends encouraging certain consumer behavior such as using energy-efficient light bulbs and appliances, and installing energy-saving windows, insulation, heating and air conditioning over penalizing the owners of larger homes. "Home size is not a good indicator of the amount of energy a household would use," he said.

Home builders have argued that today's new home construction is the most energy-efficient in history.

Lawrence Yun, senior economist at the National Association of Realtors, suggests that Dingell's plan could cause housing price declines and add nearly 300,000 foreclosures to the nation's housing market.

Nevertheless, when Dingell talks, people listen. Dingell, referred to as the "Dean" of the Congress, has been a representative for 57 years and is the second-longest serving representative.

It is estimated that there are more than 10 million homes in the United States that have square footage of more than 3,000 feet, or approximately 15 percent of the nation's homes. The Joint Tax Committee has estimated that removing the mortgage interest deduction on these homes could provide a tax benefit to the government of approximately $100 billion per year.

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