I have been going back and forth whether to sell my home next spring or not and this gives me further incentive. I don't think I could afford my mortgage right now without that deduction. Plus, if the housing market were to be made any worse by removing that deduction my house would sit on the market too long. With so many people dealing with pay cuts and other rising expense or even no job at all, this would be a stupid time to do this. We don't need a second foreclosure wave to start up.

How about they just reduce about $1 trillion of spending out of the budget. I mean, when my bank account is empty I stop spending, why can't the government do that.

"deprives the Treasury of more than $100 billion in annual revenue"

Want to kill the housing market in one fell swoop and knock millions out of the market?

Do away with the deduction on mortgage interest.

By the way, the low mortgage interest rates will increase the amount of money going to the treasury because the deductions will be so much less now than years ago.

I say end the "stealth welfare payment"! Why should non-homeowners support people through their own taxes, that buy?

I would love to see what the incentive would be for owning a home if it were truly market based (let the market decide what a home is truly worth).

I agree, there would be only incentives for people with kids to buy homes, as they buy school districts...But if I rent, I should get a break on my rent...Why should I not get a break on my rent, pay high taxes, and still support some other persons decision to own? If you want a house, YOU should pay for it...ALONE! Not on my dime...

Jay--I also favor the repeal of tax breaks for home ownership. However, perhaps due to my age, I am acutely aware of the potential unfairness of such a repeal.

Assume that I purchased a home with a fair amount of leverage (BTW, I did not do so, but let's make this assumption) based on several assumptions that I made at the time of sale: (i) that I could afford to stay in the home due to the home interest deduction and property tax deduction, (ii) that I could sell the home, tax free, because of the application of IRC § 121, and, most importantly, (iii) that the home would continue to appreciate in value (or, at least, maintain its value) because the price supports such as those noted in (i) and (ii), above, would continue in place.

This last element is of critical importance because it is likely that I applied the assumption concerning the price of my home when calculating how I would live after retirement. In other words, I assumed that I would have an asset that had substantial value that I could sell, with all or a very substantial portion of the proceeds being received tax free. If the price supports are removed, a good part of my anticipated retirement nest egg would disappear.

In essence, a repeal of any portion of the array of tax-based price supports would threaten the estate planning of many of those in the middle-class. It would represent a dramatic middle-of-the-game rule change.

The key seems to me to be a long phase-in of the tax changes. The last thing that the large number of people who retire in the next 5 to 15 years need is to have their single most significant asset reduced in value due to a change in the long-established economic rules under which they have planned for their retirement.

Hi Stuart. that's a great point. There is also the converse argument. People our age were heavily subsidized by the tax code in buying and building equity in their homes. Is it fair to take this away from younger generations now that many boomers have paid down their mortgages and no longer much need the deduction? On the other hand, interest rates are so much lower now than they were in the 1970s, 1980s and 1990s. JH

This is one of the worst ideas that I have ever heard of. It would dramatically reduce home values around the country and put more people under water. I have an idea.....stop bailing out all these companies

And, what will happen to county property tax revenues when home values decline to their "true market value"? They will go down...touching off another spiral that affects everyone, not just homeowners.

I am a homeowner. Bought a house 4 years ago. Lets be honest, if it was not for the tax deduction there would be no inncentive to buy a house. Do renters pay Property Tax? Do renters reinvest into the community to keep a home value there?

On another note: I am a coowner on the house so i split all tax deduction cause obviously we live in a two income world. I claim 0 on my taxes and do no itemize. I do a basic tax form, meaning i want them to take the neccessary taxes out of my paycheck every week so i dont have to pay at the end of the year. If you would take away those deductions I would end up paying at the end of the year because our tax code isnt intelligent enough to get it right during the year and take out the proper taxes out of each check.

You say that the only people that would be interested in buying a house would be a family with kids. Why would a family with kids pay more for a house when you can get a 2 to 3 bedroom apartment in a nice area for half of what a mortgage cost? And theres no right off either way so there are no pros or cons. A house is more maintence, and less of a area to maintain for the state which is turn means they spend less. Deducting the interest is just a moronic idea, especially with the current shape the housing market is in.

And to the baby boomer saying do away with it all. You crooks and stolen money from this country since you were old enough to work, now you want to screw it to your children and their children because you already got yours? You ignorant F@ck, your generations laziness, sense of entitlment, and greed is what has put this once great country is the basement. How bout we cut all baby boomers social security and retirment benefits since youve already stolen more than you deserve from this country. Look at how every coporation in america is run. Baby boomers at the top making " important decisions" collecting 6 to 7 figure salaries while the younger generations slaves away doing ALL the work, not even making market value that our college system told us we would make when we graduate. You blood suckin vampire. Your whole generation is a disgrace to what america once stood for.

What a hair brained idea. Jay, next time you get a thought....LET IT GO!!!

I am in favor of keeping the mortgage deduction for mortgages of less than $350K. Anything above that, oh well, interest not deductible.

I don't see a huge effect on middle-class retirees btw. It may affect home values in the short term, but our population is growing and owning your own home is still going to be the goal of most families. I also think that since retirees have taken advantage of the tax break for most of their home-owning life, well, too bad. We need to get back to reality-based valuations on property, education, and many other areas of our lives.

I agree wtih baltcate. There should be a limit on the mortgage deduction one can take. This will still encorage/assist home ownership, but doesn't subsidize those who decide to buy large and expensive homes.

The problem is always the same, the governments insatiable spending. When will our government reduce it's over spending? Leave the interest deduction alone and do the real work of reining in over spending and reducing social entitlements.

You all F**king make me sick when ISenough enough?Make the Big Government
STOP there BIG SPENDING. Leave the Mortgage Deduction alone. What will we have left You Bastard s want it all

RE: Stuart Levine's "t would represent a dramatic middle-of-the-game rule change."

You can't close holes that are 40% of the budget and 10% of the entire economy without dramatic, middle-of-the-game rule changes. Good analysis however.

"In essence, a repeal of any portion of the array of tax-based price supports would threaten the estate planning of many of those in the middle-class. It would represent a dramatic middle-of-the-game rule change.

The key seems to me to be a long phase-in of the tax changes. The last thing that the large number of people who retire in the next 5 to 15 years need is to have their single most significant asset reduced in value due to a change in the long-established economic rules under which they have planned for their retirement."

I see your point, but I can't help feeling the older generation has cashed in on the next couple generations' future.

I feel if we come out of this recession, we should eliminate this welfare payment, and instead cut taxes in an equivalent amount at least for middle-income (renters and homeowners alike) people to ease the change.

In the meantime, let's start by rolling back this welfare payment for homes well above the median in their area, and send it to debt reduction. Tax deductio or no, no one was forced to buy a McMansion.

The silver lining to the bursting of the housing bubble is that I will be able to afford a house when I start a family.

"You all F**king make me sick when ISenough enough?Make the Big Government
STOP there BIG SPENDING. Leave the Mortgage Deduction alone. What will we have left You Bastard s want it all"

Uh .. .the point is the mortgage deduction is spending ... it's a welfare payment to those who buy homes. I choose to rent and so don't receive this payment.

A quick comment to njhp who states that county property tax revenues will fall as a result.

I suspect that this is true, at least initially, but only in the aggregate. In the long run, it may not be true.

First, tax rates are typically set as a percentage of value, thus anything that lowers value will lower the net tax collected. However, localities can always raise the tax rate. After all, the tax is the cost of living in a community and that cost should not change. Of course, today, the cost is subsidized, since the tax is deductible for federal income tax purposes, thus the real rate of tax will likely be higher, but not because of the decrease in the value of the properties subject to the tax. I would note that, while there has been resistance, the State of Maryland has been able to raise the sales tax even though it is no longer deductible for federal income tax purposes.

Second, all counties are not created equal. My guess is that certain counties such as Harford and Howard will likely see the average home price decline by a greater percentage than, say, Baltimore City. After all, I believe that a greater percentage of residential property in Baltimore City is rented rather than owner occupied. Thus, the price decline in Baltimore City would likely not be as great as in some of the counties, particularly those with a large number of recently constructed McMansions.

Interesting rationale behind abolition of the mortgage deduction. I wonder however if you are looking at this tax break from more than your very isolated view of things?

You talk about creating an incentive to buy bigger homes which leads to usage of more energy, etc., etc. Have you given any thought to the fact that unfortunately there already exist MILLIONS and MILLIONS of homes in this country that aren't likely to be torn down any time soon and that each one of those houses has occupants or a family struggling to meet all of their expenses and stay afloat in this, the very toughest of economic times that has been faced by any of us?

In other words - the mortgage deduction is INCOME. It equates to cold, hard cash that families use to help make the car payment for their Prius or buy school supplies at Trget for their kids or take that precious vacation that's becoming more and more rare for so many Americans these days.

You hone in on BIG houses and WASTED energy seemingly with blinders on, not even counting the MILLIONS of modest homes and apartments housing a very large % of middle and lower class families forming a major part of the backbone of taxpeyers in this country. Forget the fact that these people face layoffs, reduced hours, extended unemployment, a hostile jobs/hiring environment, unstable future regarding entitlments ... and now you want to hurt them by further restricting their income in new and as yet unanticipated ways?

I think you need to open your eyes a little wider and think a little bit more before publishing such a restrictive view on something with such far-reaching and potentially catostrophic effects as attacking the mortgage deduction.

This is an irresponsible report. This mortgage credit does not distort the housing market, the current housing market was built on this selling point when buying a home. Very few struggling home owners would ever be able to afford to remain in their homes if this was enacted. It would further dececrate the housing market and price many prospective buyers out of the market for home ownership at all. It would not really require folks to buy smaller houses as much as it would drive the price of the existing large homes down and have a tremendous number of home owners even further under water on their loan/value.

Yes, there is a lot of money that could be extracted from home owners but the reprocussions of this would be far greater than the short term benefit to the US.

Many of these comments speak of the "elimination of the mortgage interest deduction". Correct me if I'm wrong here, but I believe the plan is to eliminate the mortgage deduction for homes over $500,000. Since most homes are sold for under that, even in high cost areas, most homebuyers will still be able to claim the deduction.

Why dont we go to a flat tax?

@EHK: who innocently inquired:

Far too many Tax Attorneys and CPA's pay far too much in campaign contributions to ever have to risk their bogus sources of income to ever be at risk.

If there was ever a time that Congress could get rid of the deduction, it might be now with interest rates so low.

I'm a fan of lower taxes and "starving the beast." But on the other hand I do think the interest deduction does distort the market and plays a role in encouraging irresponsible lending. Realtors love to use it as a selling point and lots of homebuyers don't seem to get that you still have to pay interest, you just deduct it from your taxable income. It's not a credit or refund, it's a deduction! Plus it makes the tax code more complicated.

So in my book it's a wash either way.

I will vote against any politician who supports reducing or eliminating the mortgage deduction on primary residences. I don't care what party they're in. I don't care what else they do or do not support. This deduction is so deeply ingrained into the market that tampering with it would have an unpredictable ripple effect against not only the housing market but also consumer goods. Every one of us knows someone who would be negatively affected by this.

Agree with most responses here. Also - for those that think the "rich" are getting a break here for buying more expensive homes, here's a stat to chew on: The top 1% of households by income, pay 38% of the country's taxes. The top 10% pay 75% of the taxes. Should they pay more?

Wow -- you question welfare payments to the middle class, and you get quite a response. The sense of entitlement of the people who comment here is overwhelming.

Jay -- is that a St. Augustine reference I see in the headline?
Matt. Yes! Lord, give me a tax code without negatively distortive incentives. But not yet.
At least old Gus eventually stopped sleeping around. Not confident of similar success with taxes. JH

To Ben: Yes.

That is the whole point of these discussions... that too little has been coming into the Treasury for far too long, that that too little has been so far below what is reasonable and prudent and that far too little has been AFTER absurd levels of manipulation by the wealthy (and high earners too).

That the level of spending by the Government also needs to be reined in does not negate the first premise.

BOTH need to happen.

Hey Duane and MC-- you do benefit from the deduction. Home ownership encourages stable neighborhoods and thus better schools, which translates into more taxpaying citizens. Think the 90% rented communities in Baltimore City are doing you any good?