Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, May 31, 1995 TAG: 9505310093
SECTION: NATIONAL/INTERNATIONAL PAGE: A1 EDITION: METRO
SOURCE: ASSOCIATED PRESS
DATELINE: WASHINGTON LENGTH: Medium
Nevertheless, when Senate Finance Committee Chairman Bob Packwood began hinting at a cutback in the deduction, lobbyists for real estate brokers, bankers and builders weren't about to take the threat idly.
They waged a high-powered campaign to kill the suggestion in the cradle. After nearly four months, they believe they've succeeded - for now.
``We're feeling cautiously optimistic, but as Yogi Berra said, `It's not over until it's over,''' said Stephen D. Driesler, senior vice president of the National Association of Realtors.
Packwood, R-Ore., is still promoting his proposal to limit the interest deduction to mortgages of $250,000 or less and use the revenue to pay for a capital-gains tax cut.
But Driesler and other lobbyists said they've lined up enough support to preserve the current $1 million limit, including the backing of Senate Majority Leader Bob Dole, R-Kan., and nearly every member of Packwood's panel.
Similar assurances have been offered privately by Republican leaders in the House, Driesler said.
But many legislators who say the mortgage-interest deduction is safe this year advocate comprehensive overhauls of the income tax code in 1996 or 1997. Most reform plans - including a flat-tax proposal by Rep. Dick Armey, R-Texas - call for eliminating the deduction.
The reaction to Packwood's assault on the deduction shows the swiftness and breadth of the lobbying power that can be directed at Congress when a lot of money is at stake. In this case, the stakes are huge: The Mortgage Bankers Association of America says 28 million homeowners save some $60 billion a year through the mortgage deduction, not to mention the people who broker, finance and build homes.
Capping the deductible loan amount at $250,000 would raise the taxes of 2 million homeowners by $52 billion over five years.
The fight against Packwood's proposal began modestly in early March with a handful of veteran trade-association lobbyists - representing bankers, Realtors, mortgage bankers, home builders, and savings and loans - discussing it at breakfast at the American Bankers Association's office
``There was an immediate fear and shaking, quaking in the boots, and then springing into action,'' recalled Mike Ferrell of the Mortgage Bankers Association. ``It caught us by surprise. You just don't think of the Republicans as taking on home ownership.''
By the next week, the group sent a letter to Packwood, warning that his proposal would lead to ``radical dislocation in property values, ownership and in the financial industry.'' Three days later, the Realtors' in-house newspaper alerted the association's 750,000 members to the threat with a banner headline, ``It's War!''
The groups then expanded their coalition, enlisting a consumer group, the United Homeowners Association; lumber dealers; resort developers; and the secondary mortgage market companies, Fannie Mae and Freddie Mac. They notified municipal and county officials, warning them that decreasing the deduction would lower property values and, thus, local tax revenue.
Then they sought grass-roots support. The Realtors established a toll-free telephone number, which has routed more than 13,000 calls to lawmakers' offices. In mid-May, it rallied 8,000 brokers at a Washington convention around the theme, ``Save the American Dream.''
The 64,000-member United Homeowners Association, meanwhile, is reaching out via computer, distributing information through America Online.
The push paid off earlier this month, when three members of Packwood's committee introduced a resolution calling for keeping the deduction. A similar effort is under way in the House.
For Packwood, the phrase ``mansions vs. machines'' sums up his argument. He asks: Should the government forgo tax revenue to encourage the ownership of mansions - his term for homes worth more than $250,000 - or should it promote the purchase of productivity-improving, job-creating capital equipment?
The deduction's supporters counter that any narrowing would be a first step on the slippery slope toward its elimination.
``It could have ripple effects on homeowners not affected. They couldn't be sure their deduction was safe. It could have a real chilling effect on the entire market,'' said Ed Yingling of the American Bankers Association.
by CNB