CSM calls for cutting the mortgage interest deduction

The deduction for mortgage interest is the “third rail” of tax reform.President Reagan tried to get rid of it in 1986, but real estateinterests stopped him. Now, President Bush’s tax advisory commissionsuggests limiting its use. Good idea, I say, and good luck.

The mortgage-interest deduction is bad economic policy. Itencourages consumption, rather than saving. People take out bigmortgages to free up spending money. (They convince themselves not toworry about all the borrowing because the interest on the loan can betax-deductible.) An unhealthy economic incentive, the deduction is alsoexpensive. It cost the Treasury $63 billion last year in neededrevenues. The entire budget of the US Department of Housing and UrbanDevelopment was $35 billion.

Read more (and weep) in today’s Christian Science Monitor.