Brad DeLong is worried...

...that we have too many houses and don't have enough factories, office buildings and schools.

The argument against the mortgage interest deduction (for housing) is that it skews the market....encourages people to buy a residence (free-standing or attached.) The test offered is that we don't have enough "factories, office buildings and schools." I haven't noticed a particular lack of any of those structures.

It could well be that the mortgage interest deduction is not a good idea in some ultimate sense -- but there are far higher priorities: the politics are so intractable that why even discuss it? Except as a purely academic exercise?

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Btw, the permalinks at Brad DeLong's site don't seem to be working, at least I couldn't figure them out. So you'll have to scroll down to try to find the post.

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Here's another point. It seems to me that if we get rid of the home mortgage interest deduction we are disadvantaging buyers versus renters...Which I do not think is a good idea. I think that there is in fact a real social benefit from having people invested in their neighborhood.

Btw, that disadvantage assumes continued deductibility of interest payments for business investments (e.g. an apartment building).  And to even consider so enormous a change in our economy -- interest payments not deductible as a business expense -- that I can't grasp the consequences. But it would seem to go along with some deep libertarian notions of getting rid of government and taxation entirely.

Comments

[c.]

you know distortions are usually bad. besides, the benefits don't necessarily go to homebuyers -- the subsidy drives up prices, so it was a largely one-time transfer to landowners.

[Brian Miller]

Perhaps so. But, I will certainly not vote for any politician that gets rid of my deduction so we can waste trillions on propping up the Vice President's corporation (Halliburton) and corrupt theocrats in the Middle East.

[JRoth]

Many of the proposals on this are not about eliminating the tax break wholesale, but rather replacing the interest deduction with a limited tax credit - which would still provide an incentive for ownership and would be more valuable for middle income folks while being less valuable to the wealthy. It's a great restructure, but it's not clear that the argument will be made effectively.

[Brian Miller]

Well, that makes me feel foolish for not following the actual proposal, jroth. On the other hand, the press for the proposal proves your point: it's not being sold very well. Maybe because many of us have little trust for enything that comes from this Administration?

[Chip]

Did the panel propose eliminating deductibility of interest payments as a business expense? I missed that one.

[David Sucher]

I am not aware that made such a proposal -- and it would be such a big story that I am sure it would have made it through the fog of reality -- so I assume that by its absence from any public comment, it hasn't.