The Mortgage Interest Deduction Has Got to Go
Let’s call it what it really is: a debt subsidy for the wealthy.
The simple fact is that the mortgage interest deduction does not increase homeownership and was not created with that goal in mind.
It is a holdover from tax policy dating back to 1913 to deduct all interest expense from income, a policy intended for businesses and farms.
The 1986 tax reform limited personal interest deductions to mortgages (but adding a cap), arguably because President Ronald Reagan and Congress were not willing to take on the likely pushback from the National Association of Realtors and homeowners who enjoyed the deduction.
he policy's weakness is exposed by who benefits. The only households that can claim the deduction are those that itemize expenses, and they are predominantly in higher income tax brackets.
This cohort generally doesn't need to rely on the deduction to buy a home and service the mortgage, so it only serves to push up the amount of debt they can take on and, as a result, home prices at the middle and top ends of the market.
The US Treasury Department estimates the deduction — even at a reduced level with fewer claimants — will cost just under $600 billion between 2019-2028.
Brooke Sample Bloomberg 30 mars 2024
Brooke Sample is an editor for Bloomberg Opinion and member of the editorial board.
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