No matter how motivated some politicians might be to cut the deficit, some programs and tax credits are simply untouchable. For example, Social Security can never be eliminated. Also in this category is the mortgage interest deduction. Despite all of its problems and its incredible expense to the government, homeowners and banks will never allow its elimination. Still, the deficit commission has it on the table, according to Damian Paletta of the Wall Street Journal. But since it will never be killed altogether, it could be reformed instead.
One method for creating reasonable reform is to question the very foundation of a rule or program. Although the mortgage interest deduction was not created to encourage homeownership, that end has become its aim over the past several decades. But some individuals don't need any extra assistance from the government to buy a home. So it should be targeted at middle- and lower-class Americans. This would lower its cost to the government, but still accomplish its goal.
Lower the Maximum Balance
Right now, the mortgage interest deduction can be claimed by anyone whose mortgage balance is less than $ 1 million. Does someone who can afford a mortgage of $900,000 really need help from the government? Probably not. And there's an awful lot of interest that can be deducted with a mortgage of that size. So one way cut the cost of the mortgage interest deduction would be to limit the size of the balance on which it can be claimed.