Down with the Home Mortgage Interest Deduction?
I meant to post this article last Friday (Tax Day), but got a bit carried away with estate tax repeal issues. The article (by Daniel Gross of Slate) takes an interesting look at the income tax deduction for home mortgage interest.
I think it's an important article both for the specific issues it raises about the deduction, and for its more general points about the messiness of the tax code (and our reactions to it). From time to time, I hear people talk about how we need to simplify the Internal Revenue Code and make it more fair, when those two goals (simplicity and fairness) often seem mutually exclusive. As the article indicates, even when we pinpoint a problem we can solve, the problem may persist simply because of politics (and self-interest).
Mr. Gross cleverly addresses this with his opening paragraph:
"There's a cancer at the heart of our increasingly complex tax code. A special deduction that disproportionately benefits the wealthy and distorts economic activity has grown rapidly in size and could cost taxpayers nearly $100 billion annually by 2009. Eliminating it would allow us to reduce levies on income and rationalize the system. According to Martin Sullivan, a contributing editor of Tax Notes, its existence 'means the economy has less business capital, lower productivity, lower real wages, and a lower standard of living.'"
Many (most?) Americans would support elimination of the deduction described above. But if you instead took a poll asking "Do you support the elimination of your income tax deduction for home mortgage interest," most people would answer "no."
