Mortgage Deductions

The Home Mortgage Deduction

There’s some consternation in conservative (and other) circles about tax reform proposals that would eliminate the home mortgage interest deduction.  The deduction is eliminated in most flat tax proposals, though it is not eliminated in the plan Governor Perry laid out today.

It seems to me that, at least in the abstract, a tax reform measure that lowered rates and eliminated such deductions would be fair.  To me all these credits are just a form of social engineering through the tax code.  Believe me, I benefit from these credits and so it would probably be against my self interest to see them go.  On the other hand, my overall rate would decline, so it wouldn’t be a catastrophic change for me.

At any rate, opponents of eliminating this deduction categorically state that it would depress home sales and force others into bankruptcy.  This seems . . .  overstated.  The deduction certainly had no influence on my decision to buy a home, and even if I lost the deduction without a concurrent rate decrease it would hardly force me out onto the streets.  Believe me, I like getting that extra money back, but it isn’t that much money.

Maybe I’m missing something here and the deduction has a much greater influence on people’s decisions to buy or rent than I know.  And maybe I’m just one of those “fat cats” Mitt Romney thinks are the ones who would be the sole beneficiaries under Perry’s plan.  But I fail to see how this simple credit or deduction is that much of a factor in home buying decisions.

I would love feedback on this one.

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