Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SUNDAY, June 24, 1990                   TAG: 9006250312
SECTION: HOMES                    PAGE: B-6   EDITION: METRO 
SOURCE: JIM LUTHER ASSOCIATED PRESS
DATELINE: WASHINGTON                                LENGTH: Medium

TAX PROPOSALS COULD REDUCE HOME DEDUCTION

Two of three proposals for simplifying the tax treatment of non-business interest would mean less than a full deduction of mortgage interest for many homeowners. The third option would retain the existing deduction for mortgage interest.

Either of the three recommendations would allow a deduction for at least some consumer interest, including credit cards. Under present law, only 10 percent of consumer interest is deductible for 1990; starting next year, no such deduction will be allowed.

Overhaul of the deduction for non-business interest was the most dramatic of a series of changes proposed Tuesday in the name of simplification by the staff of the Joint Committee on Taxation. The recommendations were made to Rep. Dan Rostenkowski, D-Ill., chairman of the House Ways and Means Committee, who earlier this year announced a renewed effort to simplify the tax laws.

Rostenkowski released the proposals from the staff of the Joint Committee, along with some from the Treasury Department and others from the Democratic staff of his own committee. The committee also received hundreds of pages of simplification suggestions from tax professionals and the public in general.

"At the least, we will have hearings on the proposals in the fall," said a spokesman for the Ways and Means Committee. Those hearings will help determine whether an effort will be made to write a simplification bill, he said.

Treasury and the Ways and Means staff offered their own proposals for simplifying the interest deduction, but neither went so far as the Joint Committee proposal. That proposal included these options:

Combine all non-business interest, including for mortgages, consumer debt and investment borrowing, and deduct a set percentage, perhaps 75 percent.

Deduct interest equal to net income on investments, plus some additional dollar amount.

Retain a deduction, as under present law, for mortgage interest and allow a separate writeoff for other interest, limited to net investment income. The portion of other interest that could not be deducted in the first year because of the limitation could be carried over.

The Joint Committee staff said either of the recommendations would minimize complexity of present law. In addition, the first option would remove the "incentive for individuals to structure loans as home-equity debt in order to avoid the present-law limit on the deductibility of personal interest," the report stated.

Present law has one set of rules for mortgage interest, another for investment interest and a third for credit cards and other consumer debt.