ex Fed vice chair, now Brookings, advocates change of mortgage interest tax deduction

[c1ue]

The plot thickens...

ALICE RIVLIN, SENIOR FELLOW, BROOKINGS: As we repair the damage from the bursting housing bubble, we need to focus on how to prevent the next one. Part of the answer should be converting the mortgage interest deduction to a credit. The tax provision that allows homeowners to deduct mortgage interest from their taxable income is the nation's biggest housing subsidy, a bizarre subsidy whose benefits go differentially to the well- healed. The higher your income, the higher your tax bracket and the more valuable the mortgage deduction is to you. Do higher income people merit extra help paying for housing? I don't think so. Along with low interest rates and lax regulation, the mortgage interest deduction fueled the housing bubble, especially the boom in expensive houses, which now glut the market. But don't we want to favor home ownership? Certainly, but we have over-invested in housing, especially high-end housing, compared with more productive assets. We should take this opportunity to scale back the mortgage interest deduction and convert it to a credit so that taxpayers at all income levels get the same tax benefit per dollar of mortgage interest paid. That's simple fairness. Moreover, it might encourage more productive investment and mitigate the next housing frenzy. I'm Alice Rivlin.

Of course, the benefit for the rich is actually enhanced as much as the 'poor' have less taxes to write off against.

[Rajiv]

Re: ex Fed vice chair, now Brookings, advocates change of mortgage interest tax deduction

The plot thickens...

Of course, the benefit for the rich is actually enhanced as much as the 'poor' have less taxes to write off against.

Actually under the Alice Rivlin plan, the poor would get a tax credit -- which means cash back -- if they don't pay taxes

In general however, it is still a tax subsidy to the banks as it encourages more endebtedness on part of all home owners -- this will just cause the housing bubble to continue, -- and a siphoning of wealth to the bankers!