About what issue does Oxfam and the Heritage Foundation agree?
Forces at work: Very strong agricultural lobby, especially in the breadbasket states.
The President's Advisory Panel on Federal Tax Reform has suggested lowering the eligible amount of loan debt and changing the way the the tax benefits are delivered so that they don't favor people with higher incomes and more expensive houses.
The President's Advisory Panel on Tax Reform has suggested tightening the cap on the amount of a mortgage for which interest can be counted. The current cap is 1 million dollars. The proposed cap would be in the $200 - $400,000 range varying based on local house prices. In addition they suggest changing the delivery mechanism from a deduction to a credit. With a deduction, the amount of tax savings you get depends on what tax bracket you are in. So a deduction of $100 is work $35 to someone in the highest tax bracket and $10 to someone at the lowest bracket. The panel suggests a credit equal to 15% of the amount of eligible interest, which is equivalent to a deduction for someone in the 15% tax bracket.
Unfortunately, that it's been formally suggested doesn't mean anything will happen. The MID is a political sacred cow. Many people benefit from it to some degree and it's defended by powerful construction, banking and real estate lobbies.
Economists say that the MID does NOT increase the percent of people who own homes. (Our rate of home ownership is almost identical to Canada which has no such deduction.) What it does do is increase house size and price, fueling price inflation and suburban sprawl. The effect is estimated at 15% of home prices. Because of this and the 1 million dollar cap, the MID has been called the "mansion subsidy."
