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news · Joined: 14 Jul 2007 Posts: 0 Location: Greater Boston

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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...
Info/Broken?: http://www.bostonbubble.com/link_info.php?id=2996

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JCK · Joined: 15 Feb 2007 Posts: 559

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.

Kaidran · Joined: 17 Mar 2010 Posts: 289

Both seem like good ideas to me but I have already read plenty of diatribes when similar things have been suggested.

admin · Posted: Tue May 11, 2010 3:44 pm GMT Post subject:

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

JCK · Joined: 15 Feb 2007 Posts: 559

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.