Who Cares about Mortgage Interest Deductibility?
We use the Survey of Consumer Finances to measure the change in federal tax liability that would result should mortgage interest no longer be deductible from taxable income. We argue that the elimination of this housing tax provision would lead households to reshuffle their balance sheet, thereby lowering the amount of interest income taxes collected. We find that the cost of this tax provision is between 35 and 65 percent of the estimates produced by the Office of Management and Budget, depending on the types of assets one assumes would be used to lower mortgage debt following the removal of the provision. Furthermore, since mostly rich households would be in a position to reshuffle their balance sheet following such a change in tax policy, the distributional effect of this program are much smaller than conventionally believed.
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3505, National Bureau of Economic Research, Inc.
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"The Benefits of the Home Mortgage Interest Deduction,"
NBER Working Papers
9284, National Bureau of Economic Research, Inc.
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- Sule Alan & S�ren Leth-Petersen, 2006.
"Tax Incentives and Household Portfolios: A Panel Data Analysis,"
Social and Economic Dimensions of an Aging Population Research Papers
163, McMaster University.
- Sule Alan & Søren Leth-Petersen, 2006. "Tax Incentives and Household Portfolios: A Panel Data Analysis," CAM Working Papers 2006-13, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
- Jonathan Skinner & Daniel Feenberg, 1990. "The Impact of the 1986 Tax Reform Act on Personal Saving," NBER Working Papers 3257, National Bureau of Economic Research, Inc.
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