Earlier today, The Hill published my new op ed making the case for ending the tax deduction for home mortgage interest, which the recently released GOP tax plan proposes to limit, but not completely eliminate. As I note in my article, this is a notable area where economists and other experts across the political spectrum tend to agree. Here’s an excerpt:
The tax reform plan put forward by congressional Republicans last week includes many complicated and controversial provisions. One that deserves widespread support is their proposal to limit the tax deduction for home mortgages.
Currently, homebuyers can deduct the interest paid on home mortgages with a principal value of up to $1 million. The GOP proposal would reduce that to $500,000. If there is a flaw in this plan, it is that it does not go far enough.
Congress would do well to abolish the home mortgage interest deduction completely. Such a policy could promote equity and efficiency at the same time….
Harvard economist Edward Glaeser — one of the world’s leading experts on the economics of housing — calls the mortgage interest deduction a “sacred cow that has long been in need of a good stockyard.”
That view is widely shared by economists and property law scholars across the political spectrum….
The deduction subsidizes the purchase of relatively expensive houses. As a result, it artificially skews the real estate market toward utilizing more space for large, single-family homes, and less for multifamily rental housing of the kind needed by the working and lower-middle class.
This makes our use of real estate less efficient and exacerbates an already very serious problem: the high cost of housing for lower-income households in many metropolitan areas….
There is a case to be made for reducing the overall tax burden imposed on Americans, including those wealthy enough to benefit from the mortgage interest deduction. But the more economically sound way to do so would be to lower taxes across the board, without pressuring taxpayers to spend their money on home purchases, as opposed to other purposes….
As a general rule, families are in a better position than the government to figure out whether an additional dollar is best spent on housing or on something else.