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Reno Home Owners Take a Punch!

(CBS) Changes similar to those proposed Tuesday by a presidential panel charged with suggesting ways to simplify the nation's tax code hit homeowners where it hurts most — in the pocketbook — back in 1986, says The Early Show's financial adviser Ray Martin.

"The part of (Tuesday's) proposal that really scares a lot of people is the significant reduction in the mortgage interest deduction and the elimination of the deduction for local property taxes," Martin told co-anchor Rene Syler Wednesday.

"According to the National Association of Realtors, who came out with a statement saying they will vote unanimously against this proposal, they say the elimination of the tax breaks or reduction of them for what people get for real estate today will cause real estate prices possibly to decline by as much as 15 percent, knocking about five percentage points off of gross domestic product in this country," Martin said.

"There's precedent for that. Under the Tax Reform Act of 1986, there were tax deductions and incentives for real estate that were cut out, and real estate prices dropped as much as 30 percent in some markets."

There seems little doubt that the tax code needs to be streamlined, Martin says, noting that it's now 55,000 pages: "The form 1040 is 75 lines. Over 60 percent of taxpayers use tax pros to help prepare their returns, and spend $1.5 billion a year in doing so.

"The tax code, when it was initially implemented in 1913 under President Woodrow Wilson, was just 26 pages. The form 1040 was only three pages.

"It's grown into a very complex thing and the overall goal is a good one: try to simplify it for better growth in this country."

Here are some of the specifics in the proposal: "Eliminating the alternative minimum tax, which snares about 4 million taxpayers, and is projected to snare seven times that by 2010 with an additional $3,600 tax bill; to eliminate the deduction for state and local taxes, including the real estate taxes that we pay on our homes; to reduce the mortgage interest tax deduction significantly; to reduce the tax-free amount that employers can pay for health insurance; to reduce the 'marriage penalty'; to reduce the tax rates; to simplify the tax code on capital gains, interest and dividends; to simplify the form 1040; and to simplify retirement savings and family savings accounts."