Opinion
Let's tweak mortgage interest deductions
TBO.com
Published: October 6, 2012
Kenosha (Wis.) News on simplifying the tax code:Published: October 6, 2012
Now that the housing market has started to recover a little bit, more people are looking at the role tax policy might have had in the housing bubble that burst several years ago and dragged the nation's economy into a recession.
The average taxpayer gets $559 from the tax deduction for mortgage interest, according to the Tax Policy Institute
Of course, the bigger your mortgage, the bigger your potential interest deduction. There actually is a ceiling on the size of a mortgage that qualifies for this tax subsidy, but it's absurdly high: $1.1 million.
That high a ceiling is only a limiting factor for the highest income earners, the ones who qualify to borrow that much money. For most of the housing market, there is no ceiling on the size of a mortgage that qualifies for favorable tax treatment.
The Obama administration is reportedly considering a proposal to drop the mortgage interest deduction for those whose incomes are higher than $250,000. The effect on the budget deficit of that proposal would not be very significant, according to some analyses.
It also wouldn't be fair. If national policy intends to support home ownership with a tax deduction, the benefit should apply to everyone.
A better way to change the disproportionate mortgage-interest benefit now available to wealthy taxpayers is to limit the size of the mortgages that qualify. The current limit could be gradually reduced over a period of years to a more reasonable limit that could vary with regional housing markets. San Francisco's housing market is expensive compared to Kenosha's, so the limits shouldn't be the same. ...
Eliminating the mortgage interest deduction would be a big bite out of tax policy, and it might not be a proposal that could generate much support, but candidates keep saying we should have a simpler tax code. ...
Couldn't we at least take a baby step?
With just a little more than a month remaining before the Nov. 6 general election, it is more important than ever that voters pay attention to the information they're getting as well as the source that it comes from.
It is impossible to watch television or browse the Internet without being bombarded by political ads. Most citizens have been getting propaganda in the mail nearly each day. Chain letter emails spread like wildfire, often containing only half-truths and one-sided presentations of information that is taken out of context. …
The truth is hidden somewhere in the political spin and propaganda, but voters will have to be smart in seeking it.