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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THE BIG PICTURE

You expect the big picture, and it's our job at Mother Jones to give it to you. And right now, so many of the troubles we face are the making not of a virus, but of the quest for profit, political or economic (and not just from the man in the White House who could have offered leadership and comfort but instead gave us bleach).

In "News Is Just Like Waste Management," we unpack what the coronavirus crisis has meant for journalism, including Mother Jones’, and how we can rise to the challenge. If you're able to, this is a critical moment to support our nonprofit journalism with a donation: We've scoured our budget and made the cuts we can without impairing our mission, and we hope to raise $400,000 from our community of online readers to help keep our big reporting projects going because this extraordinary pandemic-plus-election year is no time to pull back.

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