Wednesday, December 06, 2017

WTF, Reason? (Mortgage Interest Deduction Edition)

The headline attracted my attention: Why We Should Kill the Mortgage-Interest Deduction Once and for All. It's a Reason podcast.

I assumed that the reasons offered would be similar to mine, which I'll explain below. But no. Here's the (print -- I haven't listened to the podcast yet) justification Anthony Randazzo, director of Economic research at the Reason Foundation offers:

Under current law, homeowners can deduct interest on mortgage loans of up to $1 million for two houses, plus interest on home equity loans worth another $100,000. That currently costs the federal government about $70 billion in foregone revenue, making it one of the biggest "tax expenditures" in the federal budget. The Senate tax bill would allow homeowners to deduct the interest on $500,000 of mortgage debt for a single residence.

But even that lower level is too much of a giveaway ...

A tax deduction doesn't "cost" the federal government anything, nor is it a "giveaway." Not taking money from someone isn't the same thing as money coming out of your pocket. If I don't mug you, my not mugging you doesn't "cost" me the $20 in your wallet. It wasn't mine to begin with.

Now, why do I want to get rid of the mortgage interest deduction (and how, which is equally important)? Because it is:

  1. Social engineering; for the purpose of
  2. Corporate welfare.
The government says "if you buy a HOUSE, you can deduct the mortgage interest from the income we tax. If you buy anything else, well, cough up."

The surface justification for this is that owning a home is an inherently good thing and part of the American dream and that therefore the government should tax people who do that a little less than they tax people who buy heroin or booze or lap dances (for examples) with their money.

Of course the real justification is that contractors, realtors and mortgage companies contribute lots of money to politicians so that they can get a tax code favor resulting in them being able to build, sell, and loan money on, more houses (at the presumptive expense of drug dealers, liquor stores and strippers and everyone else who doesn't get such favorable treatment in the tax code).

Now, as to the how of eliminating that deduction:

Personally I would prefer a top income tax rate of 0%. But failing that, if Congress is going to tax Americans $70 billion less than they otherwise would, I'd prefer to see the rates adjusted downward so that that $70 billion is left equally with everyone to spend on whatever they damn well please instead of artificially incentivizing people to buy homes.

Now: If it's the choice of keeping the mortgage interest deduction as is, or ditching it and putting that $70 billion in the government's coffers, I'm for keeping it. Anything that reduces government revenue is good, and I'm flabbergasted to see Reason suggesting otherwise.

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