Radical, Insane, Economy Wrecking Scheme: Tax Deduction For Mortgage Interest On Chopping Block To Finish Off All Hopes Of Reviving Housing Industry
It’s been around since 1913, but its time may be up. Such a change would generate billions of dollars in federal revenue that could be used to cut the deficit while inflicting little pain on most middle-class homeowners.
By Don Lee
December 20, 2010
Reporting from Washington — Fifteen years ago, Carol Nietmann and her husband bought a spacious house in Maryland near Chesapeake Bay. And thanks to the time-honored tax deduction for mortgage interest, she said, their new place was a little bigger and a little nicer than they would otherwise have thought they could afford.
Much the same has been true for millions of Americans up and down the income scale. Perhaps the most sacred of all the sacred cows in the tax code, the home mortgage deduction has long been seen as crucial to a major element of the American dream — owning your own home.
It has also been a boon to home builders, construction workers, the financial services industry and local governments that benefited from fatter real estate tax revenue.
But nearly a century after coming into existence, the mortgage deduction may face a day of reckoning. Although out of the spotlight while the lame-duck Congress thrashes to an end, the mortgage deduction issue is likely to resurface next year when the new Congress — including a lot more deficit-hawk Republicans — takes over.
In part, the hoary deduction has a target on its back as a result of policymakers rethinking the whole issue of homeownership. In the wake of the havoc that followed the latest housing bust — a calamity that still shadows the U.S. economy and will for years to come — it’s no longer so clear that near-universal homeownership should be a paramount goal.