Tuesday morning on AirTalk, we’ll debate whether removing the deduction should be one of the ways to increase revenue for reducing the federal deficit.
Needless to say, there are many constituencies for keeping the current deduction, particularly here in Southern California. Our expensive housing market makes the deduction all the more useful for homeowners. There are also all the industries associated with housing which will lobby heavily against any change.
The deficit reduction commission’s proposal was to substitute a tax credit for the deductibility of mortgage interest. The proposed credit would provide 12-percent of the interest paid on mortgages up to $500,000.
That would benefit taxpayers with smaller mortgages, as many of those borrowers don’t claim the deduction now. However, it would be a big financial hit for those with larger loans.
Supporters of the idea say it would help balance out the homeowner tax benefit across economic lines. Opponents say it would create an enormous financial hit for regions of the country with higher home values, like Southern California.
Do you support this proposal to do away with the deduction and replace it with a 12-percent credit on interest paid?