Simply saying something doesn’t exist doesn’t create a new reality. The Senate Finance Committee voted in favor of a bill yesterday that includes a provision that will continue to require cash-strapped homeowners to pay state income tax on mortgage debt forgiven by lenders, even though no cash is provided to the homeowner. State leaders pushed through this tax change last year and plan to keep it in place this year.
In rejecting a request by Sen. Ford, who represents Mecklenburg, to exclude the provision from the bill, committee co-chairman Sen. Rucho, who also represents Mecklenburg, stated that he had not heard of any North Carolinian benefiting from the tax provision. He made the same assertion last year when making his case for targeting cash-strapped homeowners.
Could it truly be the case that the massive and pervasive mortgage fraud committed by financial entities that ushered in the disastrous national economic downturn bypassed North Carolina? The simple answer is no. In the wake of the crisis, a number of financial institutions agreed to settlements that provide consumer relief to affected homeowners with unaffordable mortgages, which include reducing the amount of principal debt owed on mortgages to make them more affordable. SunTrust Mortgage, for example, agreed to provide as much as $21 million in relief to North Carolina homeowners in a national settlement. The General Assembly’s Fiscal Research Division estimates that requiring cash-strapped homeowners to pay state income tax on mortgage debt forgiven by lenders will generate $8 million in revenue for this fiscal year – an indication that North Carolina homeowners who may be eligible to receive such mortgage relief exist.
Yet state leaders continue to adopt this out of sight, out of mind thinking that was on display yesterday. To the contrary, they expend the necessary energy and effort to push through tax cuts that largely benefit the wealthy and profitable corporations at the expense of hardworking North Carolinians who struggle to make ends meet. This effort to once again target cash-strapped homeowners is yet another example of the disconnect between rhetoric and actual policy decisions by state leaders.