Is Mortgage-Interest Deduction the Best Way?

Published in Wall Street Journal

Regarding your editorial “Houses of Lobbyists” (May 6): Buying a home isn’t the only way to build a nest egg, but middle-class families can’t get a $200,000 bank loan to invest in stocks. They can, however, get a loan to buy a house. Unfortunately, eviscerating the mortgage-interest deduction (MID) would undermine households that have taken this step. Household ownership in real estate currently stands at $23.1 trillion, and even a 5% drop in home values could destroy $1 trillion in household wealth.

What’s more, the National Association of Realtors commissioned research that examines a tax system like the one the Journal promotes. The research found that homeowners with household income between $50,000 and $200,000 would see an average tax increase of $815 immediately following enactment.

The MID supports the middle class. On average 70% of homeowners with a mortgage claim this deduction and 90% of all mortgage interest paid gets deducted, according to the National Association of Home Builders.

The deduction has been around for generations in part because homeownership is essential to wealth-building. Today, the net worth of average homeowners far outpaces that of non-owners, and a home represents millions of families’ largest asset. That sounds like a “productive” investment to us, and it’s worth defending.

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