The Legislature continues to set funding priorities, and a key Senate committee this week is seriously considering capping how much mortgage interest someone can deduct from their state income taxes. Supporters say the plan would raise much-needed revenue.
The Senate Finance Committee could advance as early as Wednesday a proposal that would limit the deduction to $12,000.
"We want to restore the integrity of it, which says that it's to help a middle income person buy a typical Vermont home," said Finance Committee Chairman Tim Ashe, D-Chittenden. "This is focused in a more narrow way at a deduction that we think ought to be reigned in."
Ashe says the current mortgage interest exemption has veered from its original goal, which was to make it more affordable to buy a home. He says that unlimited exemptions leave middle-class Vermonters to subsidize the valuable homes of those who have the resources to pay for them.
Ashe says the proposed $12,000 cap would affect very few first-time homeowners, would result in a slight increase for those who are affected, and would raise money without increasing broad-based taxes.
“We are trying to work within the confines of the governor’s stated parameters for any new revenues,” Ashe said.
Vermont’s real estate industry disagrees, though. Chris MacDonald is with the Vermont Association of Realtors, which has sent more than 700 letters in the past week to senators urging them to oppose any mortgage interest cap proposals.
“We’re certainly concerned that this is still going to hit 25,000 homeowners in Vermont," MacDonald said. "What concerns us the most is the fact that half of these people that are being affected are under the $100,000 income level.”
MacDonald argues that the proposal could slow home sales, while pointing out that Gov. Peter Shumlin and his administration oppose the proposal.
The Finance Committee estimates the cap would bring in about $7.3 million.