Today’s Washington Post highlights the latest twist in the debate over the so-called “fiscal cliff” and how the U.S. government should find new ideas as it tries to balance its budget. The “new” idea: eliminate or substantially modify the mortgage interest deduction. Both Democrats and Republicans have made statements in support, albeit with few specifics.
Why is this news? The 1986 tax reform, which substantially removed all kinds of deductions, left mortgage interest untouched. The special interests aligned around it — especially realtors, but also homeowners — were simply too strong.
Two and a half decades later, these same interests are still at work to preserve the status quo. But other ideas are out there. Is broad tax reform — including the removal of the mortgage interest deduction — an idea whose time has come?