Tuesday, November 27, 2012
New York Times DealBook: Mortgage Interest Deduction, Once a Sacred Cow, Is Under Scrutiny, by Peter Eavis:
A tax break that has long been untouchable could soon be in for some serious scrutiny.
Many home buyers deduct their mortgage interest when assessing their tax bill, a perk that has helped bolster the income of millions of families — and the broader housing market.
But as President Obama and Congress try to hash out a deal to reduce the budget deficit, the mortgage interest deduction will likely be part of the discussion.
Limits on a broad array of deductions could emerge in any budget deal. It is likely that any caps would be structured to aim at high-income households, and would diminish or end the mortgage tax break for many of those taxpayers.“This is definitely a chance worth jumping for,” said Amir Sufi, a professor at the Booth School of Business at the University of Chicago. “For a fixed amount of revenue, it’s better to remove deductions than increase marginal tax rates.” Such a move would be fiercely opposed by the real estate industry. The industry has played a crucial role in defending the tax break, even as other countries with high home ownership have phased it out.
(Hat Tip: Mike Talbert.)