Is The Mortgage Interest Tax Deduction Going Away?
There has been recent talk about the possibility of the mortgage interest tax deduction going away. First, Obama made some brief comments about it, then his debt commission included it as a possible way to improve the fiscal situation of the Federal government.
First off, the deduction isn’t going anywhere. We’ll talk about whether it should go away in a second, but you can be assured that even if it is the right move, your politicians don’t have the backbone to push that on the American people.
Secondly, it would definitely impact housing and have a negative effect on home values. I don’t necessarily include this as a reason to not remove the tax deduction, because I don’t believe in propping up markets based on government incentives and programs, but I’m just stating the facts – the interest deduction does help home prices.
So, should the tax deduction go away? Yes and no.
I think in the long run, it absolutely should go away. I completely disagree with government propping up markets, and I completely disagree with government incentivizing debt (rather than productivity).
Now, in the short run, I don’t think it should be touched for a couple reasons. First, it would only put a small dent in the overall budget and deficit problems (unless entitlements are addressed, it’s all for show anyways). Secondly, I think there are so many other things that could be done before addressing the mortgage interest deduction. As I said before, once all the other things have been done, then maybe you could look at this program.
So, there’s my thoughts on whether it should be done or not and when.
As I said, the deduction isn’t going anywhere so don’t worry about it at all. Housing is the holy grail of American economists and politicians and messing with it is like almost anti-American (yes, this is silly). Housing is the epitome of what it means to be an American! The American Dream!
So, politicians will not vote to kill the interest deduction. Just isn’t gonna happen.