Check out the Star Tribune’s second letter to the editor today one of HOME Line’s proposals for how to stop slashing State affordable housing programs.
The letter to the editor and a recent post I made on Kim Skobba’s blog, “Housing Sense,” point out how the mortgage interest deduction is not a well-targeted tax deduction. It costs state and federal governments billions of dollars and goes mostly to the highest income households.
If you are interested in digging deeper, check out this New York Times piece from a few years back. It provides a great history of the mortgage interest deduction. Actually, that particular deduction is the only remaining loophole that once allowed people to deduct any form of interest off their reportable income.
Yep, you used to be able to deduct credit card interest off your state and federal taxes. In the 1980s, the Feds figured out that that was just encouraging people to increase their debt load. However, heavy lobbying by the housing industry preserved the interest on home mortgages.
Is that deduction encouraging people to buy more home than they can afford. Several conservative economists believe so. However, it is also, quite simply, not a well-targeted tax deduction. At the title of this blog post says: we are subsidizing mansions, second homes, and $1 million mortgages.
Here’s a note from one of our blog-followers: Thanks for taking on the sacred mortgage deduction. Limiting the deduction would be a good policy move anytime, but especially at a time when there is no money to fund the basic services. Some may argue that eliminating the mortgage interest deduction would be bad for homeownership. Still, as you point out, the interest paid on credit cards used to be deductible. Removing the deduction did not hurt the industry.
