U.S. looks at reducing mortgage interest deduction to raise cash for tax cuts

The Trump administration is considering reducing the annual $1 million mortgage deduction cap for U.S. homeowners as a part of its broader tax reform, despite earlier promises to protect the tax advantage, Politico reported on Friday.

Politico said the popular deduction came up this week at a White House roundtable with real estate industry representatives led by National Economic Council Director Gary Cohn.

The publication quoted an attendee as saying Cohn was willing to "ruffle some feathers" by putting everything on the table. Currently the Internal Revenue Service allowshomeowners to deduct all interest on mortgages of up to $1 million.

Reducing mortgage deductibility, a treasured middle-class tax break in the U.S., would be unpopular with voters.

White House officials did not immediately respond to requests for comment.

How to pay for corporate tax cut?

Lowering the mortgage deduction cap could help pay for major tax cuts for businesses and individuals that Republicans view as crucial for driving U.S. economic growth.

Cohn told Bloomberg TV on Friday that the 35 per cent U.S. corporate tax rate should be more in line with the 24 per cent average rate among other countries in the Organization for Economic Cooperation and Development.

"We cannot be substantially higher than the OECD average tax rate out there," he said. "We've got to get in line with the rest of the world, we've got to entice capital to be invested in the United States."

In a separate Friday interview on Fox Business Network,Cohnsaid the administration and Congress are committed to get as low a rate as possible for corporations and other businesses.

President Donald Trump has been pushing to cut the corporate rate far lower to 15 per cent, a level that Republicans in Congress view as unlikely.

Drafting new tax regulation for September

Senate Finance Committee Chairman Orrin Hatch told Reuters this week it would be a challenge to get the rate to 25 per cent.

Two congressional tax committees are drafting tax legislation that is expected to be unveiled in September. Republicans hope to pass the bill before the end of 2017.

• Trump plans to slash U.S. corporate tax rate to 15%
• Trump plans to release tax overhaul in early September

Congress faces a packed legislative agenda when lawmakers return to Washington in September after their August break, including the task of raising the debt ceiling before October, when the Treasury Department is expected to fully exhaust its remaining borrowing capacity.

Cohn told Fox that the administration is well aware of the calendar and that Treasury Secretary Steven Mnuchin is working tirelessly to ensure that the debt ceiling gets raised.