ROBERT SIEGEL, host:
Here's a reality about any change of the law that might disadvantage the real estate market. According to the OpenSecrets.org website of the Center for Responsive Politics, since the start of last year, the real estate lobby, which employs more than 500 lobbyists, has spent almost $80 million lobbying. In the last election cycle, real estate PACs spent $9 million evenly divided among Republicans and Democrats. So what groups like the National Association of Realtors, which is the biggest in the real estate lobby, say really counts in Washington.
And Jed Smith is managing director of quantitative research with the group. Hi. Welcome.
Dr. JED SMITH (Managing Director of Quantitative Research, National Association of Realtors): Thank you. Nice to be here.
SIEGEL: Should the mortgage interest deduction be reformed perhaps in the way that we heard Professor Wheaton describe?
Dr. SMITH: Well, we think that the current system works very effectively. Of the 75 million homeowners, approximately two-thirds of them in this country have a mortgage and the majority of those people take a deduction.
SIEGEL: It's said that those people skew to the upper incomes. They have to be able to itemize their income taxes, and the bigger the tax bracket you're in the greater benefit you have. Why should lower-income homeowners subsidize wealthier people?
Dr. SMITH: Well, 65 percent of the people who take advantage of the MID -mortgage interest deduction - make less than 100,000 a year. And 91 percent of the people make less than 200,000 a year. Furthermore, homeowners pay somewhere between 80 and 90 percent of all the personal income taxes in this country. So, while it is a subsidy, it's maybe the only subsidy that most of these homeowners receive.
SIEGEL: It seems that the number of people, when they're asked about this in polls - do you support the mortgage interest deduction - the number of people who say they support it vastly exceeds the number of Americans who actually use it. Does that square with your numbers?
Dr. SMITH: Yes, yes, it does. Actually, we find that two-thirds of the people living in apartments support mortgage interest deduction. I think that may very well be because homeownership in this country is sort of the American dream and everyone sees the advantage of the current system.
SIEGEL: On the other hand, there are potentially tens of billions of dollars per year that the Treasury could recover by reducing what they now describe as this tax expenditure. If everybody is getting cut, why shouldn't people with mortgages?
Dr. SMITH: Well, there's a lot of money on the table, no doubt about that. We think, however, that there are a lot of social advantages to having a nation of homeowners. We've recognized this since Thomas Jefferson. And people who own houses tend to have better financial situations; their children tend to do better in school. There are all sorts of social advantages to society as a whole as well as the obvious economic advantages.
SIEGEL: But that sounds a bit circular, that people who are in better economic circumstances are, obviously, more likely to buy a home. It doesn't make them that much more secure to own the home. It doesn't increase their income, typically.
Dr. SMITH: We think that, on average, the mortgage interest deduction is worth about $3,000 to a homeowner. And we think that goes a long way towards helping them move along and realizing the American dream.
SIEGEL: If indeed the purpose of all this is to achieve the social good of homeownership, how does that include the second home? I mean, do we think -Jefferson didn't think in terms of having the beach house, the condo in Vail.
Dr. SMITH: Well, when you get into the second home, you get into a whole bunch of other issues related to tax law, ways of doing business and so forth, the renting the home out, et cetera. And so that's a totally different type of business. And then you have to look at this in terms of does it make economic sense, and it appears to be that way. But right now the major emphasis has been on the first home and we really haven't gotten into that other issue.
SIEGEL: Well, Dr. Smith, thank you very much for talking with us today.
Dr. SMITH: Thank you. Nice to be here.
SIEGEL: Jed Smith, who is managing director of quantitative research with the National Association of Realtors. Transcript provided by NPR, Copyright NPR.