Who Cares about Mortgage Interest Deductibility?

Martin Gervais and Manish Pandey

No 20059, University of Western Ontario, Economic Policy Research Institute Working Papers from University of Western Ontario, Economic Policy Research Institute

Abstract: We use the Survey of Consumer Finances to measure the change in federal tax liability that would result should mortgage interest no longer be deductible from taxable income. We argue that the elimination of this housing tax provision would lead households to reshuffle their balance sheet, thereby lowering the amount of interest income taxes collected. We find that the cost of this tax provision is between 35 and 65 percent of the estimates produced by the Office of Management and Budget, depending on the types of assets one assumes would be used to lower mortgage debt following the removal of the provision. Furthermore, since mostly rich households would be in a position to reshuffle their balance sheet following such a change in tax policy, the distributional effect of this program are much smaller than conventionally believed.

Keywords: mortgage interest deductibility; housing; taxation; redistribution (search for similar items in EconPapers)
JEL-codes: E62 G11 H24 H31 (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-fin, nep-mac, nep-pbe and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Journal Article: Who Cares About Mortgage Interest Deductibility? (2008)
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