But wait, you and your real estate agent will say. Won’t a change in the mortgage interest deduction knock a hole in home values?
Yes — at least at the high end, where high-bracket taxpayers take on million-dollar mortgages. At the lower end, where modest homes are bought by people of modest means? No effect on prices at all, economists say.
And even at the high end, the Mercatus report found, “it is likely to have little effect.”
You can be sure that home builders and Realtors, whose businesses thrive on big houses and high prices, will push back hard against any proposal for change.
“We’ve been preparing for this debate for a year and a half,” Jim Tobin, chief lobbyist at the National Association of Home Builders, told me recently. “The housing industry is just coming out of its depression,” he argued. “This is not the time to dampen that recovery.”
OK; not this month, then. But by the end of the year, the economy, and the housing industry, are likely to be in better shape.
The mortgage interest deduction subsidizes big houses and bigger mortgages, but that’s not a good use of tax dollars. Its benefits flow disproportionately to the wealthy and do nothing for the working poor.
The deduction currently costs the Treasury about $100 billion a year. That’s money we could use to lower taxes, shrink the deficit or pay for Medicare — a debate Obama and the Republicans will surely have.
There aren’t many policy changes that would increase government revenue, remove distortion from the economy and make the distribution of income fairer all at the same time.
Fellow homeowners, let’s take this one for the team.
Doyle McManus is a columnist for The Los Angeles Times.