Should the Mortgage Interest Tax Deduction be eliminated from the U.S. Tax Code?
- Yes (66%, 534 Votes)
- No (34%, 278 Votes)
Total Voters: 812
Eliminating or paring down the mortgage interest tax deduction would save the government $100 billion per year, according to the Center for American Progress. The tax subsidy continues to be the subject of much debate among economists and politicians who are divided about its effectiveness.
Supporters of the nation’s long history of subsidizing homeownership call the tax deduction a vital tool used by millions to achieve the American Dream. Others, however, find the policy an ineffective means of improving housing ownership levels.
first tuesday take: Americans (and Californians) must decide what is more important: a home saddled with a mortgage that makes them feel they’re living the American Dream, or a debt-free, solvent lifestyle that offers the mobility and freedom to fluidly pursue future wealth. Up until now individuals have overwhelmingly chosen to chain themselves to their homes and burden their families with debt ― an undisputedly major proponent of the Great Recession.
Mortgages have become so commonplace that planning to purchase a home with cash is almost unheard of. Homebuyers are encouraged to avoid savings plans and finance their purchase with a mortgage since acquiring a home free and clear of debt and retaining it as the family residence triggers no tax benefits (except deductible property taxes, if not eliminated by the alternative minimum tax). [For more information regarding homeownership tax deductions, see the June 2011 first tuesday article, Subsidizing the American dream and the March 2011 first tuesday article, The home mortgage tax deduction: inducing debt and stifling mobility.]
As a result, homeowners often justify their debt by relying on the mortgage interest tax deduction to help bear the additional costs – which implicitly passes the subsidy on to the seller and the lender. Thus, the homeowner is betrayed by the so-called “subsidy” these tax deductions provide since the deductions influence the homebuyer to pay an increased price for his home. Unfailingly, the subsidy is too small to offset the increased costs and financial risks of the larger mortgage he needs to finance the purchase of the property.
Even as myriad homeowners suffer through foreclosure and unemployment, 90% of Americans still believe homeownership is an essential pillar of the American Dream. Our unyielding obsession with property ownership remains steadfast even if our means of attaining it is desperate and rationally beyond reach. [For more information regarding homeownership ideals, see the July 2011 first tuesday article, Like myths, this old dream will never die.]
The reality of this post-recession economy is most people need to rent, not buy and own. The government acts in the best interest of its citizenry by eliminating tax loopholes and subsidies that keep its people living beyond their means.
Re: “Mortgage interest tax deduction a debt talk target?” from the Washington Post