Beneath the din of the nail-driving championships and talk of aluminum siding and floor-staining techniques at the Builders Show here was a constant murmur: "flat tax ... flat tax."
Builders are worrying about tax reform and especially the possibility the mortgage interest deduction might be eliminated.
Repeal of the mortgage interest deduction, which is included in GOP presidential candidate Steve Forbes' flat-tax plan, among others, would seriously deter Americans from buying homes, the builders believe.
At almost every educational session, board meeting, or roundtable discussion, speakers addressed the issue. If not, an audience member would bring it up.
Builders are so worried that they ranked the mortgage interest deduction first in importance on a list of national concerns compiled from a survey conducted at the National Association of Home Builders convention. The issue beat out budget-balancing, crime control, and family values.
Reassurance was standard operating procedure for most speakers, who noted that political support behind maintaining the mortgage interest deduction seems solid.
"Homeownership has always been the cornerstone of the American Dream, and I share your principle that it always will be," Sen. Phil Gramm, R- Tex., said at the conference's opening ceremony.
"If you followed Steve Forbes' advice, next year you could all meet in a telephone booth," he told the thousands of home builders in attendance.
The average American homeowner's taxes would rise more than $2,000 if the mortgage interest deduction were repealed, Sen. Gramm said.
A recent study by DRI/McGraw-Hill, a Lexington, Mass.-based consulting firm, in conjunction with the National Association of Realtors, predicted that home prices would fall 15% under a flat tax. The home foreclosure rate would double, the study found, and mortgage losses would triple.
Cutting the mortgage interest deduction would be political suicide, NAHB chief economist David Seiders told an audience in a housing and economic outlook workshop. "Newt, Dole, and Gramm are against it," he added, and "the NAHB is prepared to spend money on this issue."
At an association board meeting late in the conference, Henry Cisneros, secretary of the Department of Housing and Urban Development, added his support for maintenance of the deduction. "Tinkering with the home interest mortgage deduction would do damage to the vehicle of homebuying," he said.
Many industry experts scoffed at the idea that a flat tax could even pass. "It's difficult to impose an intellectual exercise on the real world," said Lewis Ranieri of Ranieri & Co., Uniondale, N.Y. "You can't just go cold turkey on a tax system," he said.
Directly below the deduction-flat tax issue on the list of builders' concerns was balancing the federal budget. Many feel that federal fiscal stability would lead to drastically lower interest rates and higher home sales.
Sen. Gramm agreed. "Mortgage interest rates would drop to 4% if the budget was balanced today," he said. Millions of American families would then be able to afford homes, he added.
"When I was a kid, I remember sitting around the kitchen table with my mama and trying to decide which bill we could get by without paying this month," Sen. Gramm said. "What we need are officials in Washington who will make the same tough decisions that are made in the kitchens of working America every single night."
