The mortgage interest deduction (MID) is one of the most beloved by voters in the United States. However, most economists agree that it is a poor way to stimulate homeownership. It has been found to have a negligible impact on homeownership rates and to increase the regressivity of the tax code. Nonetheless, homeownership is viewed as an admirable policy goal. For example, Haurin et al. (2002) find that homeownership improves child outcomes, due to the stronger investment incentive of owners compared with renters and greater geographic stability. The Tax Policy Center suggests replacing the MID with a "refundable tax credit for all taxpayers" (i.e. including those without a mortgage) to more effectively (and equitably) promote homeownership. So, in light of the recent housing crisis, what should we do about the MID?
Abolish it. It doesn't do anything to make housing more affordable, as all advantages to land users are appropriated by landowners. I.e., the MID only raises the price home buyers must pay for land.
We should be abolishing Tax credits, not coming up with new ones. The days of using the US tax code as a stealth dole to the middle classes needs to end.
And do you suggest replacing it with a more efficient incentive? For example, given the positive effects on children, perhaps the tax credit could be targeted specifically to families with young children.
It was not that long ago that we could deduct all loan interest. And this is how it worked since the beginning because it was too much trouble to separate small business and personal incomes so everyone got the interest deductions. This tax policy was NEVER meant to encourage home ownership. For those who say home ownership drives the economy...well...building apartments/rentals equally drives the economy. For those who qualify home ownership based on getting that interest deduction from their personal incomes, for me, this means they don't financially qualify for home ownership. Lastly, other than buying some property for retirement or recreational enjoyment, in today's economy and uncertainty, why would anyone buy a home? If a person can earn scads of money then this does not pertain to them. But for the other 125 million workers, remaining mobile should be a priority! Since we don't keep our jobs more than a few years, instead of commuting one hour each way every day for that new job...just find another rental near the new job. If your state is not producing jobs, then move to another location which will give you more opportunities. Rentals are far cheaper than owning and the big difference used to be the ROI on buying property...this is now questionable. Home ownership for all those who can barely work out the loans is a stupid decision...
The home interest deduction is required for most to justify the long form, allowing charitable contributions to be deductible. Is this about the home interest deduction? Or just a way to increase tax collection, and reduce charitible contributions (increasing the governments role as safetynet).
I would love to eliminate the deduction, however, I fear that we will see another round of deadbeats not paying their mortgages if the deduction is eliminated. The net effect is several thousand dollars in additional taxes for most Americans. Most Americans are too irresponsible to adapt to a change. Good idea for tax revenue. Bad idea for current home owners with mortgages to keep their homes.
I would be in favor of eliminating all tax credits and lowering the total % taxed. Since 0% tax for all is unlikely for now - this would be an acceptable compromise. Rand Paul is one of the leading politicians attempting to do this and I think he deserves our support.
The more deductions working people get the better. Eliminate deductions for the top 1% by a more vigorous AMT, increase deductions for average American. Deductions are good things. Why would any rational person want conservatives to take away their deductions? As the disingenuous conservatives always say about those who propose raising taxes on the top 1%, if you don't like your deductions, don't take them. I'll take mine.
For many, the mortgage interest is high enough to justify itemizing. In which case, charitable contributions reduce your taxable income. Unless you contribute a whole lot, charitable contributions by themselves don't justify itemizing.
Limit it to the interest that a median priced home, with 20% down, would pay at current rates. Have the deduction amount be reset January 1 of each year.
Seems kind of silly to me that only those who can itemize get the interest deduction? This is not very equitable. Even if a person doesn't qualify to itemize, give them the deduction off of their income, as long as that deduction alone does not create a refund. OR, stop the deduction for everyone. I never bought any of my properties because of this deduction but it was always nice to have the deduction. I would have been just fine if the interest deduction did not exist. If the USA wants to incentivize home ownership, then tend to the economy so that property owners see a consistent asset value increase or ROI. Nothing creates investors like ROI. But on the flip side, I never bought a property for the ROI...always for the enjoyment of living on that property, so any ROI was simply a nice bonus...
This is a good example of one major problem in the USA today; the gratuitous need for instant gratification! On average, if you wish to speak solely about the ROI on home ownership, this is a long-term plan. This means 10-20 years or more and still there are no guarantees. So...when we have these downturns in the economy, and they effect property values, this only represents 2-3 years out of the longer term of 10-20 years. For all you know, current property values in 5-10 years might be right back where they were or higher. But to expect them to instantly bounce back in 1-2 years is not going to happen. If a person buys property solely for the ROI, then they also must assume the associated risks. If they buy property for the enjoyment, then they should not be caring about ROI. Even if their home mortgage is under-water today, why care when enough time 'should' make it better...
