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I support reducing the Mortgage Interest Deduction (MID)

Yesterday, I got a Realtor Action Center “Call to Action” asking me to send mail to my Senator in support of protecting the Mortgage Interest tax Deduction MID.

The problem is, I support reducing the availability of this Deduction, and possibly removing it altogether over time.

I also support removing a bunch of other tax deductions and loopholes at the same time… especially those that primarily benefit large companies like our friends in the oil industry.

But, I won’t be a hypocrite and say cut the deductions that benefit them, and not cut the ones that benefit me.

We face a looming financial crisis greater than our current one, because of the incredible debt level our government (and we citizens) maintain and the deficits we continue to run.

I don’t see it as possible we will ever agree on cutting spending enough to fix the problem. I believe we need to cut spending also, but by itself, it won’t be enough.

That means tax increases in some form or fashion.

Modifying, limiting, or removing the MID over time, is a good example of how this can be done reasonably.

NAR and the various Mortgage Industry orgs all make similar arguments (http://www.houselogic.com/articles/mortgage-interest-deduction-vital-housing-market/)

Despite news articles like this one (http://www.dailyfinance.com/2011/04/20/eliminate-mortgage-interest-tax-deduction/) almost no one is suggesting that the MID go completely away in the near term. 

Most of the current proposals for modifying the Mortgage Interest Deduction involve:

  • Cutting it off for higher incomes and higher mortgage amounts
  • Cutting the amount of deduction
  • Cutting the deduction for 2nd homes and 2nd mortgages

These sound great!  These deductions won’t hurt the ‘average’ home owner. How many average homeowners have a 2nd home?  How many average homeowners have a $1,000,000 plus mortgage?  And, of those that do, how many of them would really be hurt by not being able to deduct that interest?  Give me a break! 

As an additional benefit, reducing the deduction for mortgage interest would encourage lower debt levels by homeowners. It would encourage people to stop treating their homes like a credit card, which was a major factor in the recent real estate/financial crisis.

The average homeowner doesn’t have to get negatively affected by changes to the MID.  I would like to see NAR focus their energies on helping find the best way to make an MID reduction work for everyone instead of a knee-jerk fight against any change in the status quo

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