I am currently reading a report entitled "Investing in America's Economy" which was prepared by Our Fiscal Security. The group is a collaborative effort of Demos, the Economic Policy Institute, and The Century Foundation, and is intended to be "A Budget Blueprint for Economic Recovery and Fiscal Responsibility". A PDF copy of the report can be downloaded here.I was originally drawn to this report because Maggie Mahar is a contributor and has provided proposals on how to rein in health care spending as part of an overall push towards debt reduction and fiscal responsibility.
And while I certainly intend to blog on the ways in which the control of health care spending can improve the financial health of the nation I was particularly impressed with one aspect of the economic recommendations which (I feel) gets far too little attention in the media.
It's time to end the McMansion Subsidy.
The report suggests that we replace the current mortgage interest deduction with a refundable tax credit of up to 15% of interest on up to $500,000 in mortgage debt. This step alone would save the Federal government 387.6 billion in the next 10 years.
Mike Konczal (aka Rortybomb) has written about the details in a post entitled "Our Fiscal Security's Fiscal Blueprint: Budget Reform as FinReg" over at Seekingalpha.com. I strongly recommend reading that post.
Briefly:
Making the deduction a refundable credit would increase the value of the credit for many homeowners. The deductibility of mortgage interest on owner occupied homes is projected to cost $149.6 billion in 2015, or $637.6 billion over 2011-15. We [Our Fiscal Security] propose converting the deduction to a refundable tax credit of 15% of interest on up to $500,000 in mortgage debt, which in itself would save $51.6 billion in 2014 and $387.6 billion over 2010-19.
It can certainly be argued that the credit bubble inflated the housing market in major part due to the subsidies given for extravagantly priced homes.
Mike points out the implicit difference between home ownership vs. home buyership or home indebtedness in his post. The current subsidy creates incentives for indebtedness and leverage in consumers. This is not a good thing. As it is, subsidizing McMansions is ineffective and highly regressive.
In my opinion it should be abandoned.
And this is coming from someone who (admittedly) lives in what can be called a (sigh) McMansion.
I am currently reading a report entitled "Investing in America's Economy" which was prepared by Our Fiscal Security. The group is a collaborative effort of Demos, the Economic Policy Institute, and The Century Foundation, and is intended to be "A Budget Blueprint for Economic Recovery and Fiscal Responsibility". A PDF copy of the report can be downloaded here. I was originally drawn to this report because Maggie Mahar is a contributor and has provided proposals on how to rein in health care spending as part of an overall push towards debt reduction and fiscal responsibility. And while I certainly intend to blog on the ways in which the control of health care spending can improve the financial health of the nation I was particularly impressed with one aspect of the economic recommendations which (I feel) gets far too little attention in the media. It's time to end the McMansion Subsidy. The report suggests that we replace the current mortgage interest deduction with a refundable tax credit of up to 15% of interest on up to $500,000 in mortgage debt. This step alone would save the Federal government 387.6 billion in the next 10 years. Mike Konczal (aka Rortybomb) has written about the details in a post entitled "Our Fiscal Security's Fiscal Blueprint: Budget Reform as FinReg" over at Seekingalpha.com. I strongly recommend reading that post. Briefly:
