Thursday, May 16, 2013
This document is the sixth in a series of papers compiling tax reform options that Finance Committee members may wish to consider as they work towards reforming our nation’s tax system. This compilation is a joint product of the majority and minority staffs of the Finance Committee with input from Committee members’ staffs.
The paper lists the following broad goals in this policy area:
- Simplify the law in order to reduce the cost to businesses and individuals of complying with the tax code;
- Carefully consider whether and how to address any positive or negative externalities;
- If policy makers choose to include incentives in a reformed tax code, make such tax expenditures more equitable and efficient; and
- Carefully consider how to treat different parts of the country and industries equitably.
On housing, the paper includes the following options:
- Gradually repeal the mortgage interest deduction;
- Limit the mortgage interest deduction;
- Convert the mortgage interest deduction to an above-the-line deduction;
- Convert the mortgage interest deduction to a credit;
- Phase out exclusion for capital gains on sale of principal residence;
- Make permanent the deduction for mortgage insurance premium payments;
- Extend exclusion from income for cancellation of certain home mortgage debt;
- Repeal the Low-Income Housing Tax Credit (LIHTC);
- Replace the LIHTC with an equivalent reduction in tax on rental income;
- Reform or expand the LIHTC; and
- Create a non-refundable tax credit for low-income renters.
The paper lists other policy options for state and local financing, tribal financing, community development, and state and local tax uniformity.