Misinformed and Misled About the Benefits of the Mortgage Interest Deduction

15 Pages Posted: 13 Mar 2014

See all articles by Dennis J. Ventry

Dennis J. Ventry

University of California, Davis - School of Law

Date Written: March 11, 2014

Abstract

Tax experts have long indicted the mortgage interest deduction (MID) for distorting the housing and mortgage markets and for inequitably distributing its benefits. It creates a false baseline for the cost of housing, encourages taxpayers to pay for homes with debt rather than with cash or financial assets, causes wasteful and unproductive misallocation of physical and financial capital, and distributes benefits disproportionately to upper income households. Furthermore, the MID results in less economic productivity, reduced labor mobility, higher unemployment, depressed real wages, and a lower standard of living.

And yet the MID remains wildly popular among the American populace, while politicians continue to pay homage to the tax code’s “most sacred tax break.” This Article argues that the public and the pols are misinformed about the false benefits of the MID, largely because they are misled by the MID’s most resolute supporters. Proponents of the MID, principally the real estate industry, participate in an endless campaign of misinformation about the tax code’s second most expensive subsidy. This Article highlights the real estate industry’s biggest whoppers, focusing on false claims that the MID benefits taxpayers at all income levels, and contributes to wealth accumulation and financial security.

Suggested Citation

Ventry, Dennis J., Misinformed and Misled About the Benefits of the Mortgage Interest Deduction (March 11, 2014). Cityscape, Vol. 16, 2014, UC Davis Legal Studies Research Paper No. 371, Available at SSRN: https://ssrn.com/abstract=2407725

Dennis J. Ventry (Contact Author)

University of California, Davis - School of Law ( email )

UC Davis School of Law
400 Mrak Hall Drive
Davis, CA 95616-5201
United States
530-752-4566 (Phone)

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