Location, Location—Deduction

The mortgage-interest deduction costs taxpayers billions, but it won't go away anytime soon.
By Daniel Gross
Posted Thursday, April 14, 2005, at 2:55 PM PT

There's a cancer at the heart of our increasingly complex tax code. A special deduction that disproportionately benefits the wealthy and distorts economic activity has grown rapidly in size and could cost taxpayers nearly $100 billion annually by 2009. Eliminating it would allow us to reduce levies on income and rationalize the system. According to Martin Sullivan, a contributing editor of Tax Notes, its existence "means the economy has less business capital, lower productivity, lower real wages, and a lower standard of living."

Who wouldn't want to excise such a tumor from the mighty American economy? President Bush, Congress, oh, and you, too.

We're talking about the home-mortgage-interest deduction, which has become too successful to be killed and perhaps a little too successful for our own good.