Tuesday, May 09, 2017
Once Again, the Tax Law Gets Mortgages Backwards
The Trump tax plan has many interesting features but it gets homeownership incentives all wrong. As I have noted before, if policymakers were really interested in financing home ownership (as opposed to "renting from the bank") it should provide a tax deduction for paying down the PRINCIPAL of a home mortgage, not for paying interest. Paying down principal means acquiring more equity in the home, i.e., moving closer to actual ownership, in fee, without encumbrances. The current system, continued under the Trump plan, provides incentives to increase leverage (decrease equity) and keep it high. It is a great boon to the real estate and banking industries but does not help Americans to save for the future as they once did.