Saturday, December 4, 2010

Mortgage Interest Deduction

The mortgage interest deduction: winners and losers «  Modeled Behavior
We spend around $100 billion a year on this subsidy, and to the extent that it’s defenders are correct and homeownership does have positive externalities, it is actually making urban areas worse off. Even if we want the questionable goal of encouraging homeownership, recent research from the Cleveland Fed has argued that down payment subsidies are a more efficient way to do it. If we can phase the mortgage interest deduction out slowly so that there is limited disruption to housing markets, this policy really should be the first on the chopping block.
They also report that the effect on increasing home ownership was so small that each additional homeowner cost about $53,000!

If Russ Feingold had really wanted to burnish his maverick credentials, he should have embraced a phase out of the MID. This would have had the added benefit of eliminating a tax break that primarily benefits the wealthy, something a self-described progressive should support.

1 comment:

Dad29 said...

Kinda depends on the meaning of "wealthy," no?

I'd trade the MID for a realistic child-deduction, of course.

To reduce to the (almost) absurd: which is the better public policy? More children, or bigger houses?