Whats wrong with the mortgage-interest deduction?
It’s very strangely designed. If the goal were to encourage homeownership, you’d want to target the people on the margin between renting and buying, people early in their lives. But because a tax deduction is worth more to higher earners, we have a policy that gives 10 times more benefits to Americans earning more than $250,000 than to households earning less than $75,000. It’s an enormously regressive policy. And its benefit rises with the size of the house and the debt you take on. Why should the government be complicit in urging people to buy larger homes? Can something so popular actually be taken away? A not-so-politically-impossible fix would be to lower the cap on what’s deductible, currently $1 million of mortgage debt. Reducing it to between $200,000 and $250,000 would eliminate the most regressive aspects of the tax, and it wouldn’t touch the majority of Americans. And do it over time, given the delicate condition of the housing market. Ideally you’d get rid of the deduction
