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Don't deduct mortgage debt - tax it instead

 
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Joined: 14 Jul 2007
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Location: Greater Boston

PostPosted: Tue May 11, 2010 1:30 pm GMT    Post subject: Don't deduct mortgage debt - tax it instead Reply with quote

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Description: Don't deduct mortgage debt - tax it instead
URL: http://www.economist.com/business-finance/economics-focus/displaystory.cfm?story ...truncated...
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JCK



Joined: 15 Feb 2007
Posts: 559

PostPosted: Tue May 11, 2010 3:34 pm GMT    Post subject: Reply with quote

OK. Sounds objectively reasonable to me. But the politics behind doing this are toxic.

At best, we could cap the mortgage value subject to the deduction, now at $1m for a first mortgage, at a lower value, or make the deduction less regressive, which right now reduces your taxes at your marginal rate.

Either of those might be politically (more) viable.
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Kaidran



Joined: 17 Mar 2010
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PostPosted: Tue May 11, 2010 3:39 pm GMT    Post subject: Reply with quote

Both seem like good ideas to me but I have already read plenty of diatribes when similar things have been suggested.
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PostPosted: Tue May 11, 2010 3:44 pm GMT    Post subject: Reply with quote

There are also a few things that could be done to make any such changes less of a shock to the system. First, existing borrowers could be grandfathered into their deduction on existing mortgages, perhaps for up to 30 years. Second, the changes could be phased in over a period of many years (say 10), so that the system has a chance to transition smoothly. I do agree that this is unlikely to fly politically anytime soon, though, given the pull of the FIRE industries.

- admin
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JCK



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PostPosted: Tue May 11, 2010 7:10 pm GMT    Post subject: Reply with quote

Grandfathering is probably a good idea, given that people take out a mortgage with the expectation of getting the tax deduction.

I guess if they don't raise the $1m cap for a really long time, that would have the same effect.

I don't believe the cap value is tied to inflation, like much of the rest of the tax code.
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