Wichita Realtors and builders are upset with Gov. Sam Brownback’s plan to eliminate the mortgage interest tax deduction, saying that piece of the governor’s state tax reform plan will stymie an already struggling housing market.
Members of the Wichita Area Association of Realtors and the Wichita Area Builders Association said Monday that they plan to lobby against the elimination of the deduction, a longtime state and federal tax staple that has encouraged homeowners to buy. If the state deduction evaporates, it’s a key reason for homebuyers to stay out of the market, association officials say.
Wess Galyon, president of the local builders association, said his organization will begin lobbying against the deduction elimination this week. He said Brownback’s move is another blow to a market struggling for new home starts.
“I think it creates another round of uncertainty for my builders,” he said.
“For years, the deduction has been viewed as a cornerstone of tax policy. … Losing that puts people who might desire to be a homeowner in a mindset where maybe now isn’t the time to buy.”
The deduction elimination comes at a time when analysts think new home starts have bottomed out in the Wichita area, and existing home sales are primed to recover.
John McKenzie, president of Wichita’s Coldwell Banker Plaza Real Estate, said he welcomes “meaningful tax reform.”
“But not at the expense of homeowners,” McKenzie said. “The goal of income tax reform should be to reduce the tax burden on Kansas and not simply shift the tax burden between different classes of taxpayers.
“Any proposals that seek to eliminate the ability of a homeowner to claim any itemized deduction for the payment of mortgage interest or state and local property taxes increase the cost of home ownership and unfairly increase the tax burden on homeowners.”
The tax reform proposal unveiled by Brownback last week is a broad remake of the state’s tax code. The plan cuts income tax rates but eliminates many deductions like the home mortgage interest payment and charitable contributions. Opponents call the plan a move to shift the costs of running government from the wealthy and corporations to lower-income taxpayers.
On Monday, Brownback’s office referred calls to Revenue Secretary Nick Jordan for comment. Jordan said the Realtors’ opposition is in contrast to their support last year of a bill that would have ratcheted down personal income taxes and eventually eliminated the mortgage interest deduction.
“The states that are growing are the states with low or no personal income tax, which the Realtors agreed with last year when they supported Senate Bill 1,” Jordan said.
Tessa Hultz, chief executive of the Wichita Realtors association, said her group thinks the deduction elimination will batter the Kansas economy.
“There are currently 417,000 Kansas taxpayers that take advantage of the home mortgage interest deduction that would be affected by the new plan,” Hultz said.
“A statewide poll of registered voters in Kansas showed that 80 percent believe the availability of the home mortgage interest deduction is a factor in the decision on whether to purchase a home. More than two-thirds of those polled said that eliminating the home mortgage interest deduction would have a negative impact on the Kansas housing market and the overall Kansas economy.”
It also would have an impact on the state’s culture, said Gary Walker, the residential general manager for J.P. Weigand & Sons in Wichita.
“Naturally, we are opposed because we are in the business of selling homes,” Walker said. “But I am also personally opposed because of the firm belief that home ownership is a benefit to the family, building equity and pride of ownership. Anything that makes it more difficult is not desirable.”