Chuck the Home-Mortgage-Interest Deduction


At his blog for Conde Nast's newish publication, Portfolio, Matt Cooper raises a fair question:

Why do we subsidize mortgage interest?…it's a truism that a subsidy yields higher prices. Home sellers can charge more because buyers are effectively subsidized by their ability to deduct mortgage interest. The purpose of the deduction is to encourage home ownership even though the deduction extends to people who hardly need government largesse. Canada has no mortgage interest deduction and yet its rates of home ownership are comparable to those in the United States. In other words, if we phased out the deduction, it probably wouldn't reduce the rate of home ownership….The mortgage interest deduction now costs us close to $100 billion a year. We should have a debate about whether we really need it any more and how it might be phased out.

More here.

The Tax Foundation points out that the HMID is basically welfare for the wealthy here.

A related reform that worked out just fine: USA Today recounts that 1986 tax reform bill that got rid of the deduction for interest on credit-card debt–a move that was predicted to destroy the credit card industry (and had no next to no effect).