The purpose of the mortgage interest deduction is to incent people to become homeowners. The percentage of the population under 30 that owns a house it at all time lows, specifically because housing costs, even with the carrot of a mortgage interest deduction, is at all time highs. In the Seattle Metro area, a starter house is going for around $500K, with a mortgage of over $3K/mo. That’s $40K/year in after tax income. Wages have been depressed for years, and a couple making $100K/year cant even qualify for a starter home. (using traditional ratios, 25% of pretax income means they would need to make a total of $160K/year to get a starter house). The issue is that you can rent for about $1500/mo, so why pay a $3K mortgage? Renters don’t pay property taxes, so they are very enthusiastic about voting for anything that increases property taxes. You want to make someone a conservative ... make them pay for the effect of their votes. The elimination of the MI deduction would eliminate Conservatism in a few years.
Fortunately, I don’t owe many more years on my home.
Unfortunately for the millennials, they’ll continue living in their parent’s basement apartment for the next 20 years.
I am a loser with the tax proposals. I tithe to my church and donate to other charities. I also have a mortgage and pay state taxes.
Churches and charities could really be hit by this too. I give thousands per year. My tithing + state taxes + mortgage interest deduction + charity donations is well over the proposed personal deduction. I’ve been trying to do things the right way but I am going to pay more for it. That’s just the way it sometimes goes.
So... the banks collect a higher interest rate with the ‘sell’ being you can deduct it on your taxes. Who is benefitting here? Banks. Eliminate the deduction and you will see mortgage rates drop slightly also as the cost of the mortgage increases.
Why should a payment I make to the bank be deductible on my income tax? Why should I expect others to subsidize my house purchases? Either we are consistent in our conservatism or selfish in our interests.
Renters do pay property tax. The landlord includes it in the rent.