Recently, several legislators have proposed plans for gaining control of the skyrocketing national deficit that include cutting the mortgage-interest tax deduction. Currently, the IRS considers home mortgage interest a tax-deductible expense, and taxpayers can save money on their taxes by submitting the amount of interest paid on their mortgage as an itemized deduction. Interest is deductible on both main homes and second homes, but not on additional homes after the second home.
Thomas Hoenig, president of the Kansas City Federal Reserve Bank, believes that losing the mortgage-interest deductions may be an unpleasant but necessary “hard decision” that has to be made in order to regain control of the national budget, which has spiraled out of control in recent years. Hoenig hopes that the mortgage-interest deduction can be altered rather than eliminated, because “if we [keep it] without making some shared sacrifices, we’re going to pay in another form”.
Lawrence Yun, chief economist for the National Association of Realtors (NAR), disagrees, arguing that a lot of people bought homes under the existing “rules of the game” that allow mortgage-interest tax deductions. He predicted that not only could eliminating the deduction cause people to lose their homes, but that loss of the tax benefit could “reduce home values by an additional 15 percent and cause severe wealth destruction”. Yun emphasized the need for “public policies that promote responsible, sustainable homeownership” at a NAR conference in New Orleans this weekend.
Do you think that the mortgage-interest deduction can or should be eliminated?
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