Mortgage deduction debatable

In an effort to balance the state budget, Gov. Sam Brownback has proposed to eliminate the home mortgage deduction for Kansas taxpayers.
The proposal has received its fair share of resistance, on a local level and state level.
“I’m cautious about the proposal, it doesn’t seem like a good idea to me,” State Representative Ed Bideau said. “I’m still studying it.”
Duane Goossen, former state budget director, said Brownback predicts the elimination of the deduction will raise $163 million in revenue for the state. Goossen now serves as vice president for fiscal and health policies for the Kansas Health Institute.
While Goossen agrees the predicted numbers are accurate for revenue gained, it is still to be determined whether the elimination will have a positive effect for Kansas homeowners.
John Brocker, a local Realtor with Allen County Realty, said the governor’s proposal is hitting homeowners where it hurts the most. He said the elimination will discourage people from wanting to buy a home, which will affect the state housing economy on a larger level. The state housing economy, according to Brocker, represents 13 percent of the total state economic gains.
“Housing has always been a mainstay of our economy,” Brocker said. “It will hurt our economy. People are being taxed out of existence, which hurts the American dream of wanting to own a house.”

According to Goossen, the state’s projected revenue for next year is “hundreds of millions of dollars below expected expenses.” The gains in revenue will come from these three proposed actions:
— A permanent extension of the 6.3 percent sales tax. Almost 1 percent of the sales tax was to expire July 1. The  extension will raise $262 million for the budget.
— The mortgage tax deduction elimination, which will raise a predicted $163 million in revenue.
— Transferring $116 million from other departments to offset the deficit.
These three proposals will increase state revenue by $541 million. Goossen said if these numbers are accurate, it will be enough to balance the budget for next year.
“If those things don’t happen, the budget will not balance,” he said.

Bideau said the state is defending its proposals by saying the money gained from eliminating the mortgage tax deduction and extending the sales tax rate will offset that being lost by lowering income tax rates, which took effect Jan. 1.
The income tax was lowered from 6.45 percent to 4.9 percent for individuals earning more than $15,000 and from 3.5 percent to 3 percent for taxable income up to $15,000.
Bideau said he is skeptical that the amount people are saving in income tax will offset the money lost from the elimination of the mortgage tax deduction and the higher sales tax rate.
“I want to see the numbers, I’m initially opposed but I’m willing to take a look at it to see if it would result in an overall tax deduction,” Bideau said. “I’m skeptical.”
He said the revenue must be increased by the state to overcome the deficit, which means the taxes must increase by principle somewhere.
As for the region, both Bideau and Brocker agree that southeast Kansans can not afford to take any more hits to their tax expenses. Brocker said Allen County is “notorious in having low-wage jobs” and many people rely on their deductions to keep their homes.
“I have literally had little old ladies come to me and say that they need to decide whether they are going to pax their property taxes, buy medicine or buy food,” he said. “It is really hard.”
He said high property taxes have forced people to move into less than ideal housing situations. This is particularly evident for the elderly, who live on a fixed income.
The housing economy is already being affected by the economy, and Brocker questions why the state is using property and housing taxes as their “go to” to increase revenue.
“Why would you want to hurt your third largest industry, we are already hurting,” Brocker said. “We have not learned to control spending habits, and there will come a day when people will move away.”
He said it is up to the homeowners to oppose the proposed legislation, because they are the people who are going to see the effects.
The issues are before the Senate Tax Committee, which must approve some plan to put before fellow legislators.
“We have to come out with money somehow,” Bideau said. “But they (homeowners) are carrying more than their fair share, and that is a major concern of mine.”
He said due to changes in the legislature, four counties (Wyandotte, Johnson, Sedgwick and Shawnee) can pass a vote on a legislation. Based on this, he said rural communities do not receive a fair voice with the state. For issues such as housing and property taxes, that affect poor rural areas the most, he said the legislation may not have their needs in mind.
“Do they have sympathy for that,” he said. “I don’t know.”