Replacing the home mortgage interest deduction

Townhouses by Shutterstock.com

Article Highlights

  • The federal tax treatment of owner-occupied housing cries out for reform.

    Tweet This

  • Current tax policy offers unwarranted subsidies for the purchase of expensive homes by high-income taxpayers.

    Tweet This

  • Current tax policy does little to promote homeownership by those of more modest means.

    Tweet This

In this policy proposal - part of The Hamilton Project's 15 Ways to Rethink the Federal Budget - Alan Viard proposes to replace the mortgage interest deduction with a refundable credit as a way to reduce the artificial incentive for the construction of high-end homes by better targeting the tax breaks for housing. The article has been revised from the published version to remove the invalid $300 billion 10-year revenue gain estimated in the published version. The author thanks Sheila Crowley for detecting the flaw in the original revenue estimate. 

INTRODUCTION
The federal tax treatment of owner-occupied housing cries out for reform. Current tax policy offers unwarranted subsidies for the purchase of expensive homes by high-income taxpayers, but does little to promote homeownership by those of more modest means. To address these problems, I propose to replace the mortgage interest deduction with a refundable credit and to reduce the size of the mortgages eligible for the credit while providing transition relief. Although this proposal is not ideal in every respect, it offers an effective way to scale back and better target the tax system's housing tax breaks while raising revenue in a progressive manner. 

Viard: Replacing the Home Mortgage Interest Deduction

Download PDF

 

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Alan D.
Viard

What's new on AEI

Making Ryan's tax plan smarter
image The teacher evaluation confronts the future
image How to reform the US immigration system
image Inversion hysteria
AEI on Facebook
Events Calendar
  • 25
    MON
  • 26
    TUE
  • 27
    WED
  • 28
    THU
  • 29
    FRI
Wednesday, August 27, 2014 | 3:00 p.m. – 4:15 p.m.
Teacher quality 2.0: Toward a new era in education reform

Please join AEI for a conversation among several contributors to the new volume “Teacher Quality 2.0: Toward a New Era in Education Reform” (Harvard Education Press, 2014), edited by Frederick M. Hess and Michael Q. McShane. Panelists will discuss the intersection of teacher-quality policy and innovation, exploring roadblocks and possibilities.

Event Registration is Closed
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled today.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.