So this happened!
Let me start off by saying that I don't itemize and so we don't claim the Mortgage Interest Deduction, so my bias may well lay on this fact.
My wife and I scrimped and saved (eating a LOT of rice and beans) to put together a 20% down payment on a house that we could afford. We paid up front another couple points to drop the interest down even more - so, we actively worked so that, in the end, and within our income bracket, we essentially made ourselves ineligible for the deduction.
OK - so I get the sense that part of the ideas being floated by the Republicans is to limit the Mortgage Interest deduction. Why are we opposed to this?
Now before You all jump down on me about this, YES, I understand that they are proposing this as an alternate to raising the Top Marginal Rate, to which my response is "Why can't we do both!?" ... but, why are we defending the Mortgage Interest Deduction?
Without getting into how this deduction MAY have contributed to the housing bubble, let us deal with where we are now!
Take a look at this table from 2008 on Percentage of People claiming the Mortgage Interest Deduction:
As You can see if You click through on that link, the title of the page: Tax Savings from Mortgage Interest Deduction Vary Significantly from State to State
This is something that we basically all know intuitively - Some states have a lot higher housing costs than others, and so it would be obvious that the Mortgage Interest deduction is just as variable from state to state. My question is "Why is the federal government involved in an issue that is so clearly locally determined?"
The table is from 2008, and I have no doubt that the numbers have changed since then, and I would guess that they have skewed even more.
But just to summarize the table from 2008 - of all Tax Filers, the percent that claimed the Mortgage Interest Deduction was 26.83%, ranging from a low in North Dakota of 14.6% to a high in Maryland of 37.94% with average deduction claims ranging in Oklahoma of $ 8,372 to California of $18,876
Why isn't the issue of the Mortgage Interest Deduction more on the State and Local side than at the Federal level - not the 'historical reason', but the reason NOW!? Why shouldn't the federal government LIMIT this deduction?
So, as we can agree (I hope) - this deduction is 'unfair' geographically - with, essentially, some localities 'subsidizing' others.
Now, if we look at this table from 2005 on who itemizes, and extrapolate percentages of who uses the mortgage deduction - this table from 2003 we can see the clear income inequality of who is using the Mortgage Interest deduction.
The mortgage interest deduction is pretty inequitable - both geographically and income. Why are we wanting to preserve this?
There are no shortage of additional issues to deal with in discussing the Mortgage Interest deduction:
Should it be available to Second / Summer / Vacation Homes?
How is it applied with regard to Income Property?
Should it be limited based on Income?
Should it be variable based on location?
I have thought a bit about including a poll, and I have decided on the most basic information collection poll to go with, and as such, I unfortunately won't be including any Pie in this poll, and I would actually ask that You rec this diary just so that I can collect this data from the readers of this blog.
Next Up -- The Charitable Giving Deduction!