NVDave,
I am trying to understand your logic. While it is true that the mortgage deduction (thank you realtors and bankers) has encouraged more debt risk, how does revoking it improve the position of real estate?
It would cause immediate depreciation in the value of real estate to take it away. The current tax system is gamed and so screwed up that only lowering the tax burden makes sense. Raising during this crisis will just worsen the crisis.
The issue of whether you own a house or not should be tax-neutral.
The policy of the US Congress has been that “owning a house is what we want people to do, and we want them to be in debt to do it, so we’ll allow them to deduct their mortgage interest.”
This should not be a decision into which the tax system is injected. People should decide whether they own a house or rent a dwelling/apartment purely based on their personal issues at the time they make the choice.
The mountain of real estate debt (and the collapse of same) has led to a depreciation in the value of real estate. It is time to kick the NAR out of the halls of Congress and cease trying to game the real estate markets. The Congress should put in a phase-out of the mortgage deduction completely over a period of say, 5 to 10 years. Taxes paid on real estate should be deductable, just as the sales taxes, property taxes on cars, etc are deductable. If people want to buy a house, that’s fine and well, but we should not be encouraging the use of debt to buy houses; if anything, we should encourage people to go into debt as little as possible going forward.