Analysis of Policy Concerning the Mortgage Interest Deduction, An

Lopez, Desirai L.
Tax policy can prove to be complex, and it often contains numerous backdoor spending programs that would not otherwise be authorized through a direct spending program. The National Commission on Fiscal Responsibility and Reform, whose purpose is to put forward a bipartisan proposal to balance the budget and improve the long-term fiscal outlook, has presented a report identifying how a tax reform should be structured. Although this research paper does not analyze every aspect of that report, it does address the mortgage interest deduction. The deduction can be seen as helping the nation increase homeownership, but it can also be seen as providing subsidies that increase our nation's national deficit. For 2011, it is expected to provide homeowners with about $119.9 billion; an amount that more than doubles the entire budget for the federal Department of Housing and Urban Development. After analyzing the history of the mortgage interest deduction, this paper can help address why the nation is in need of a tax reform. Then through an analysis of the Commission's report and other suggested policies, this paper demonstrates how proposed policies will be beneficial, identifies the weaknesses of those policies, and proposes alternative solutions.
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