The Mortgage Interest Deduction: Causes of Fluctuations in a Procyclical Tax Expenditure

David Splinter

Public Finance Review, 2019, vol. 47, issue 5, 807-827

Abstract: The mortgage interest deduction (MID) is the largest source of US federal homeowner support. I estimate that this tax expenditure fluctuated between 0.2 and 0.9 percent of gross domestic product (GDP) over the past five decades. About half of these fluctuations were caused by changes in tax policy, rather than changes in the housing market. Fluctuations in the MID tax expenditure do not tend to move with homeownership rates; instead, they are procyclical, meaning the MID may exacerbate business cycles.

Keywords: mortgage interest deduction; tax expenditures; housing subsidies; tax policy; marginal tax rates; cyclical policy (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:47:y:2019:i:5:p:807-827

DOI: 10.1177/1091142119854689

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