The Home Mortgage Deduction

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The home mortgage deduction is regressive, pushes up housing prices, motivates people to buy bigger houses, and doesn’t increase homeownership rates anyway.  So Ed Glaeser says we should get rid of it:

Now, I do understand that drastically reducing the cap on the mortgage interest rate now, in the midst of a housing crash, would be kicking the markets when they are down. Yet this crisis provides us with an opportunity to act that will be lost if we wait until housing prices rise again.

So here is my utterly quixotic proposal. Enact legislation now that will gradually decrease the cap on the mortgage principal for which homeowners can deduct interest payments by $100,000 a year over the next seven years until it hits $300,000.

Sure, fine by me.  The home mortgage deducation is a perfect example of a policy that might have made social sense at one time, but outlived its usefulness years ago and now continues a zombie-like existence as one of the third rails of American tax policy.  But why bother decreasing the cap?  Why not just decrease the amount of interest you can deduct from 100% to 95% to 90% and eventually to zero over 20 years, starting, say, in 2011?  And replace it each year with a proportionate increase in the standard deduction.  (Or maybe something else.  Ideas welcome.)

Or replace it with nothing at all, in the name of fiscal responsibility.  Not many votes in Congress for that, though, are there?

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DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily crazy—Mother Jones' journalism is driven by one simple question: Will America move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

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