Repeal of HEL Tax Break Proposed

Congressional tax experts are recommending a repeal of the interest deduction on home equity loans, arguing that it is "inconsistent" with encouraging homeownership and "yields disparate treatment" of homeowners and renters.Repeal of the HEL interest deduction is just one of many recommendations the staff of the Joint Committee on Taxation has made to Senate Finance Committee Chairman Chuck Grassley, R-Iowa, and Sen. Max Baucus, D-Mont., to eliminate tax shelters and unintended tax loopholes. "While we won't embrace every recommendation, we'll give the report a close look," Sen. Grassley said. Similar proposals to repeal the HEL deduction surfaced in the early 1990s when the federal government was concerned about large budget deficits. Financial services firms mounted grassroots lobbying efforts to successfully preserve the deduction. "Home equity loans are much more popular today," said Consumer Bankers Association spokesman Fritz Elmendorf. "That suggests this would be even more of a third-rail type issue, and I don't think they would want to touch it." The Joint Committee proposal would allow the deduction to continue for existing HELs and eliminate it on new ones.