Realogy (NYSE:RLGY) CEO Richard Smith on Monday explained why the House Republican tax plan could hurt both homeowners and buyers.
Under the newly proposed GOP tax plan, married couples can deduct interest on mortgages of up to $500,000 instead of the current cap of $1,000,000. The plan will also cap the write-offs of state and local property taxes at $10,000.
“This is not about the builders, it’s not about the realtors, this is about the consumers. What everyone seems to be fairly dismissive of is the average home in this country if we proceed with the tax bill as proposed will lose about 10% of its value,” he told FOX Business’ Liz Claman on “Countdown to the Closing Bell.”
The National Association of Home Builders also opposed the GOP bill because they believe the changes would raise the cost of buying and owning a home.
Smith explained how the plan may “disincentivize” all home buyers, which in turn will hurt the U.S. economy.
“If we abandon the longstanding tax policy of supporting homeownership in this country, it’s going to have unintended consequences. We experienced this in 2006 with the great deflation in value. We don’t need to knowingly go through that again. The unintended consequences are going to be damaging to the U.S. economy,” he said.
Smith said that the mortgage interest deduction has encouraged Americans to buy homes since the tax policy was developed in 1912.
“This country decided then and continues to believe today that homeownership is good for the U.S. economy. It’s 15% to 18% of the gross domestic product of this country [and] to suddenly abandon that in exchange for creating this opportunity for renters to be just as advantaged as homeowners sets a new stage and a new course for this country and I don’t think that’s the intent. Homeownership is good for this country, it’s good for our tax system and to abandon that I think is misguided,” he said.