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'89 NAHB HOMEWORK : TAX Exclusion in Home Sales Said to be Vulnerable

January 29, 1989|DAVID W. MYERS | Times Staff Writer

ATLANTA — The war between housing trade groups and some federal lawmakers over reducing tax breaks for home ownership appears to be shifting to a new battleground.

For months, the nation's major realty trade associations--from realtors to lenders--have been publicly fretting that Congress may try to reduce the amount of deductions that homeowners can take for their mortgage-interest payments.

Just last week, builders meeting here for their annual convention were saying that the deduction--which costs the Treasury an estimated $35 billion annually--is a tempting target for lawmakers who want to reduce the nation's huge budget deficit.

Now, a growing number of Capitol Hill insiders are saying this sacrosanct deduction will emerge unscathed from any budget-reduction efforts. But its place on the bargaining table of Washington budget-cutters has been taken by another cherished tax write-off: The $125,000, one-time exclusion on resale profits for sellers who are 55 or older.

'Put Into Play

The exclusion "has definitely been put into play" by lawmakers looking for ways to cut the deficit, says a lobbyist from one major trade group.

"We're pretty sure that (Congress) won't mess with the mortgage-interest deduction, because they've gotten a lot of negative feedback from the public," said the lobbyist, who asked not to be identified. "It helps everybody, and a lot of people couldn't afford to buy a house without it.

"But the exclusion doesn't help anybody buy a home--it just lets them keep more of the profits when they sell. It would be hard (for lawmakers) to say, 'We don't have any money for housing programs, but we're going to keep giving equity-rich property owners this huge tax break.' "

The lobbyist's comments essentially echoed remarks made by Congress' top expert on tax policy at a little-noticed conference a week earlier in Washington.

Ronald A. Pearlman, whose Joint Committee on Taxation advises both the U.S. Senate and House, said he was "not aware" of any serious discussion on Capitol Hill about reducing mortgage-interest write-offs.

"If anything is vulnerable" to cutbacks this year, Pearlman said, it's the $125,000 exclusion. Eliminating the exclusion would pump an estimated $4 billion a year into the Treasury.

However, Pearlman added, both the mortgage-interest deduction and the $125,000 exclusion will probably emerge untouched from this year's budget-cutting efforts.

Stephen Driesler, top lobbyist for the National Assn. of Realtors, said in a telephone interview from his Washington office that he, too, is now "cautiously optimistic" that the mortgage-interest deduction would be spared.

'Kind of Surprising'

"We're stopping a little bit short of saying that it's been taken off the bargaining table, but I must say it's looking good at this time."

Driesler said Pearlman's remarks that the $125,000 exclusion may be vulnerable to budget-cutters "was kind of surprising, because it was the first time I heard it. But Mr. Pearlman is rather well-connected, so we'll have to keep our eyes open to see what happens next."

If federal lawmakers make a serious attempt to eliminate or scale back the exclusion, Driesler said, they may have another fight on their hands with realtors and other trade groups.

"There's a substantial number of people who are depending on their home equity to help them through their retirement years," Driesler said. "If you take a big chunk of that away in taxes, a lot of people are going to have a tough time making it on just their Social Security payments and maybe a private pension."

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