The mortgage interest deduction subsidizes housing for people who don't need the help
The House tax bill would cap the benefit—a solid idea in a bill that doesn't offer many.
In January, not long after my wife began her first parish ministry job, she and I became home owners. Around early April or so I realized that my days of throwing together our tax return while watching a baseball game are probably over. Along with the complication of following tax rules for clergy, we now have a compelling reason to itemize our deductions: the mortgage interest deduction, also known as the most significant way the federal government subsidizes housing.
In November, House Republicans passed a tax-reform bill. For the most part, it reads like a parody of GOP orthodoxy: deep tax cuts for both corporations and private businesses, a higher income threshold for the top individual rate, full repeal of the estate tax. The bill declines to close an income tax loophole for finance workers or to restrict conservation easements so they stop going to golf course developers. It does muster the resolve to crack down on deductions claimed by such notorious freeloaders as student debtors, people with expensive diseases, and teachers who buy their own pencils. (The parallel Senate bill approved on December 2 avoids some of the House version’s worst outrages, substituting others.)
Yet this lousy legislation also includes the odd bit of sound public policy. Exhibit A: the House bill would tighten limits on the mortgage interest deduction, lowering the ceiling on eligible home loans from $1 million to $500,000. Here too there’s plenty to criticize about the politics, starting with the fact that houses worth more than a half million dollars tend to be located in liberal districts (i.e., big metro areas). Still, taken on its own, this is a really good idea.
