Consequences of cutting mortgage tax break

Some say 'average' family would end up paying higher taxes

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Every few years, some committee floats the idea of eliminating the mortgage interest deduction on primary residences. It came up in again in Washington, D.C., recently, along with the possibility of delaying Social Security payments for many of the bouncing baby boom generation.

The presumed goal is that by eliminating tax incentives for some individuals there would be a lower tax rate for all taxpayers.

My reaction to these proposals in a "normal year" had always been:

  • If the mortgage interest deduction must be on the chopping block, why not first start with second homes, weigh the results, then re-evaluate?
  • If eliminating the mortgage interest deduction on primary homes is deemed critical, why not reduce the maximum amount first, test and revisit?