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Is lower mortgage interest deduction coming?

Panelists weigh one of ideas for increasing federal revenues


Sunday, August 7, 2011

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Kelly Cunningham, National University System

Answer: Yes

Economic studies find the mortgage interest deduction does not increase home ownership and disproportionately benefits higher income households who are likely to be homeowners without the subsidy. Those on the margin between owning and renting, young and lower-income households, derive little to no benefit. The deduction seems to subsidize the construction of larger, more expensive homes for relatively few taxpayers, instead of broadening home ownership for most Americans. The deduction should be repealed, however, in a way limiting the impact on prices in an already disheveled housing market. Capping the deduction is a good first step to eliminating it all together.