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Politics : American Presidential Politics and foreign affairs -- Ignore unavailable to you. Want to Upgrade?

To: DuckTapeSunroof who wrote (43720)	6/11/2010 2:54:02 PM
From: TimF	Read Replies (2) \| Respond to of 71588

There is an extensive discussion of the interest deduction in the comments to this post volokh.com One commenter points out ways that rental housing is indirectly subsidized (using the term broadly, tax benefits that don't even go directly to the renter) to argue for keeping the mortgage interest deduction to balance off the benefits for renters. (My normal response would be to get rid of the subsidies for the renters as well, but in this case it would be difficult since one of the major ones is the deduction for business expenses, and eliminating that would require completely redoing the tax code, and taxing revenue or gross receipts rather than profit, which is an issue that should be discussed on its own merits, or lack their of, and not done as a response to mortgage deduction issues) Another points out additional ways home ownership is subsidized. And there is the obvious point that even through the deduction is reasonably considered distortive, and unjustified, that just canceling it would cause a lot of harm as well. ----------- Vlad Konings says: I recognize that, objectively, the mortgage deduction is not a good thing because of the way it distorts signals. Nonetheless, there is harm in changing the rules abruptly, because uncertainty is, if anything, even worse for an economy than distorted signals. There are a lot of folks out there who bought a house they could afford ... so long as they got the interest deduction. Without it, they are under water, not a good thing in what is already a depressed housing market. Can we grandfather the deduction on existing mortgages? If not, can we find a better time for this reform? volokh.com