My editor wouldn't let me include this in On Other Blogs yesterday because it wasn't about Tim Burgess, but here's a wonky story I think is getting too little play in the discussions of the "fiscal cliff" (which is really a fiscal slope, but that's another post).
In its efforts to address the "fiscal cliff"—the automatic tax increases and spending cuts that will kick in next year if lawmakers don't agree on a bipartisan plan to reduce the national debt—Congress may consider changes (though probably not straight-up elimination) to the mortgage interest tax deduction, the Washington Post reports.
(Bonus local angle!: US Sen. Patty Murray (D-WA) will chair the senate budget committee, giving her a powerful voice in the "fiscal cliff" discussions.)
The deduction costs the US government $100 million a year. Here’s what it does, and why it needs to go away.
What it does: The mortgage interest tax deduction allows homeowners to deduct the interest they pay on their homes, including second homes (or second, third, fourth, fifth, and sixth, if you're Mitt Romney) from their taxes, up to $1 million. Not surprisingly, it’s widely viewed as an incentive for Americans to become homeowners; it’s also one of the most popular tax deductions in the U.S.
Why it should be eliminated: The mortgage-interest tax deduction overwhelmingly benefits the very wealthy, for two reasons: Rich people, obviously, are more likely to have large mortgages (not to mention second homes). The tax deduction provides an incentive for wealthy people to buy expensive homes, driving up the price of housing and giving a big tax break to people who don’t need the help.
Additionally, lower-income and middle-class homeowners don't tend to itemize their deductions, because their itemized deductions would amount to less than the IRS’ standard deduction (currently $11,900 for a couple).
Renters, of course, don't benefit from the deduction at all.