nonlnear
Platinum Member
- Jan 31, 2008
- 2,497
- 0
- 76
Okay back on topic. I didn't see anyone here finding the elimination of the mortgage interest deduction being politically feasible. Attempting to eliminate it would be like health care reform all over again. The number of big money, well organized special interest groups that would work to stop the abolition of the deduction would be enormous and they wouldn't have to work very hard to prevail. There is nothing to be gained politically from ending the deduction. The only way I see this particular deduction going away is via a complete overhaul of the income tax system <insert favorite replacement scheme here>. Replacing the interest deduction with a "payment of principal" type tax break sounds good but the benefit would kick in toward the end of a mortgage whereas the interest deduction applies upfront. With Americans moving every six years on average a principal payment deduction replacement would be a hard sell.
Reread my response to Fern's objection that a principal deduction would be back-loaded. It only "kicks in toward the end of a mortgage" for people who strain their budget to the point that they can only afford to pay the required payment. However for people who leave themselves more room in their budget to pay extra, there is an incredibly flexible tax shelter available. You can reduce your taxable income by as much as you want by paying down your mortgage. Think about how that would change people's attitudes towards their mortgage debt once the public figured out how the new system worked. You would see people getting into homes with lower payments, and saving aggressively.
