The Home Mortgage Deduction

Boon or Boondoggle?

The Simpson-Bowles proposal strikes me as the outcome of a joint bipartisan fit of pique. “Take that, you free-lunchitarians of both parties!” It’s hard to blame the authors. I feel that way myself quite a lot these days. But the proposal to eliminate the home mortgage deduction strikes me as really ill-conceived, or at least ill-timed. The Wired family is surely not alone in residing in a property that would be worth a whole lot less than a rental if it were not for the home mortgage deduction. We refinanced some years ago; it might have been a really frivolous and bad idea except that, as it turned out, we consummated the deal shortly after I spent a month under bed arrest after major emergency surgery, unable to work and not yet on Social Security or Medicare. Without the proceeds of the refi, we would have been in real trouble. But as a result, most of what we are paying for our mortgage these days is interest. And, since we live in a condo, the monthly assessment for which is only slightly less than the rent on an apartment of similar vintage, if we weren’t getting the deduction, we would be a lot better off renting. Except, of course, that, without the deduction, a lot of other people would have much less incentive to buy our place, so we would have a hard time selling it. This would create a whole new housing market crisis, even if we were not currently in one.

Like most of us, I am familiar with the arguments against the home mortgage deduction, and agree with many of them. But I feel roughly the same way about it that many “centrists” feel about the wars in Afghanistan and Iraq and used to feel about the Vietnam war: it was a bad idea getting into them, but getting out is going to hurt a whole lot of innocent people. At the moment, it would probably be the equivalent of a nuclear bomb going off in our economic system.

If I thought there were any chance of Simpson-Bowles being legislated in its entirety, I would be really worried. But I think what the authors really did was just list all the “third rails” of our current polity and crunch the numbers, knowing—and probably intending– all the while that this was a purely theoretical exercise, or maybe a wish list.

Jane Grey

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