The reported thinking in Washington which suggests that it may be time to end the interest write-off for up to $100,000 in home equity financing is a non-starter, a political suicide mission in a city where taking care of one's own political hide is always a first priority.

At a time when budgets at the federal and state levels are running in the red and lawmakers are looking for new things to tax, old deductions to eliminate and current taxes to raise, the real estate community now has a new and stronger argument to say that real estate tax policies should be left alone. Why? Aside from political self-interest, tinkering with the present real estate write-off system could cause massive harm to the economy, an economy which cannot afford such a wallop.

It's usually said that real estate represents roughly 20 percent of the nation's goods and services. That's a huge proportion of the national economy, but now comes evidence that even 20 percent is just too little.

In the fourth quarter of 2004, the Bureau of Labor Statistics estimated that the nation's gross domestic product amounted to $11,967 trillion. Of this amount, $1,259.7 trillion went for housing, $461.5 billion was spent on "housing operations" and $358.8 billion was spent on furniture and household equipment. That's a total of $2.080 trillion, or 17 percent of the overall economy.

According to AdAge.com, however, a typical family spent $40,817 on goods and services in 2003, the last year for which figures are available. Of this amount, $13,432 went for housing and housing-related costs -- a full 33 percent of all household spending.

"Americans," says AdAge.com, "are buying more -- and bigger -- homes. The Census Bureau says 69% of families own homes today, vs. 63% in 1965. The average new house today is 2,300 square feet, vs. about 1,500 square feet in the mid-60s and below 1,000 square feet in 1950, according to the National Association of Home Builders. Those rooms need to be furnished. Add it up, and housing accounted for 33¢ of every dollar of consumer spending in 2003, up from 26¢ in 1950." (See: What U.S. Consumers Buy And Why, February 7, 2005)

If 17 percent seems too low and 33 percent seems to high, then consider a just-released report by Boston University's Center for Retirement Research. It shows that a typical married couple devote 29 percent of their total income in housing -- more than is spent on health care (20 percent) or food (13 percent).

For unmarried seniors, housing represents 39 percent of all spending, according to the study.

Are not mortgages paid off by seniors? Nope. The study found that "25 percent of married adults ages 65 and older are homeowners with mortgages." (See: Understanding Expenditure Patterns In Retirement, January, 2005)

It's long been recognized that the largest political block in the U.S. is composed of those who live indoors. Red states, blue states, conservative or liberal, the electorate shares common ground when it comes to real estate. Except for a few think tanks, the idea of reducing mortgage interest, property tax or capital gains write-offs appeals to no one.

Cutting real estate write-offs was politically unattractive when the country ran massive surpluses, but now that we're in a period of massive debt the political climate has changed: Even such things as once-sacred farm subsidies are open for discussion in Washington.

But as to ending the home equity write-off, forget it. No congressional district would forgive a politician who supported such a measure. Just ask your neighbors.

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