In my Wednesday column, I argued that the federal tax deduction for home mortgage interest should be trimmed -- because instead of helping first-time homeowners, a worthy public policy goal, it mostly subsidizes big mortgages.
I wasn’t surprised to learn that a lot of readers disagreed. Angry emails flooded in. Many of the objections were well reasoned, although one reader just called me a Marxist. He must not have noticed that Mitt Romney, who’s not a Marxist, also proposed capping the mortgage deduction -- actually, all itemized deductions -- during his presidential campaign.
Paul Lopez of the National Assn. of Home Builders wrote to question my estimate that the mortgage interest deduction costs the Treasury about $100 billion a year. He noted, correctly, that Congress’ Joint Committee on Taxation recently issued a new estimate of the deduction’s net cost as only $68 billion. My $100 billion number came from the White House Office of Management and Budget, which uses a different methodology. I’ll give that point to Lopez, but I don’t think the smaller number affects my main point: The deduction isn’t well designed.
Lopez noted that the mortgage interest deduction is used by 34 million taxpayers, representing about 90 million people. He’s right, but that’s still fewer than 1 in 4 taxpayers.