Mortgage Interest Deduction Elimination Press Continues
The White House and Congress see the 100 billion dollars a year that goes to homeowners and want to spend it on their own projects. They have realized they are spending way too much money and the deficits are growing out of control.
How out of control? Let’s talk nearly 20 trillion dollars in debt by 2015.
Now they are not going to stop spending. Spending means power in Washington, so instead they are doubling down. Taxes are going up, tax breaks are being removed, and every possible revenue source is being examined.
This includes the Mortgage Interest Deduction for Homeowners!
We all need to keep an eye on Congress and the White House. They know they are in trouble and could lose control of the process by January. If this is the case, they may push through a host of changes to our tax code in the coming months that could include the popular tax break for mortgage interest.
Stay tuned to this blog and we’ll keep you informed of anything Washington tries to push (or sneak) through that could cause us all to lose what was once considered an untouchable tax benefit of home ownership.
Are Mortgage Tax Breaks Breaking the U.S.?
The latest Case-Shiller housing data suggests that housing markets have now stabilized. Prices were higher in February 2010 than they were in February 2009.
This stability makes it possible to move beyond stop-gap measures and to envision fundamental reforms that will make the next housing crisis less damaging. Some economists believe lowering the $1 million cap on the home mortgage interest deduction is a good place to start.
The deduction is an old policy that has remained a constant in good times and bad. Moreover, the bubble can’t be explained by low interest rates or easy mortgage approvals or high loan-to-value ratios.
The home mortgage interest deduction also subsidizes Americans to buy bigger homes, and there is little reason to like that. Americans, even poor Americans, have almost twice as much living space as the average resident of France or Germany.
There is a powerful connection between structure type and ownership, which means that encouraging homeownership implicitly encourages sprawl. More than 85 percent of people in single-family detached dwellings own; more than 85 percent of people in dwellings with more than five units rent.
The mortgage interest deduction is extremely regressive. Some economists estimate that the deduction typically saves $523 per year in taxes for home-owning families earning between $40,000 and $75,000, and $5,459 per year for families earning more than $250,000.
Now that prices have stabilized, some would like to see the home mortgage deduction phased out. The interest deduction currently has an upper limit of $1 million. That limit could be reduced by $100,000 per year over the next seven years, which would lead to a less regressive $300,000 cap. After that point, we could consider replacing the interest deduction altogether with a flat homeowner’s tax credit that would encourage homeownership without encouraging borrowing or big houses.
We’d love your opinion on these thoughts of elimination of the mortgage interest deduction. Just click the “comment” link below and sound off!
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