Analysis of the President's Commission on Housing's Proposal of a Mortgage Interest Tax Credit PDF Download

Author: Rae Jean B. Goodman
Publisher:
ISBN:
Category : Mortgages
Languages : en
Pages : 42

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Book Description
This paper presents the results of an investigation of the effect on savings and loan associations for the 1975-80 period of the mortgage interest tax credit proposed by the Presiden'ts Commission on Housing. The tax proposal is a mortgage interest tax credit available to final investors (holders) of motgages or mortgage-backed securities, comuted as a percentage of the mortgage interest earned. Eligibility for the tax credit would be based on net new mortgage flows; the level of the tax credit would depend on the interest income from mortgage assets. The report of the President's Commission discussed both a fixed-rate tax credit and a graduated tax credit. The conclusions of the study are: (1) a constant-rate tax credit of 2 percent for S&Ls investing 40 percent or more of all net new funds in mortgages would provide, in general, a break-even point with the current tax system. (2) A step-graduated tax credit ranging from 1.0 to 2.5 percent with a 40 percent or greater investment of new net funds in mortgages would provide a tax-neutral situation. (3) A graduated tax would supply additional incentives for mortgage investement relative to a constant-rate tax credit. (4) A tax credit covering a much greater range in portfolio investment in mortgages would provide incentives for new entrants into the market. (5) There should be some form of eligibility requirement linked to annual mortgage flows to prevent any windfall gain to one-time mortgage issuers (holders). (6) There are significant arguments to support a mortgage interest tax credit relative to the current tax system.