As America faces the fiscal cliff, the impossible becomes conceivable. Finally, we face the possibility of reducing the home mortgage interest deduction. Such a reform is long overdue, because the long-entrenched deduction has serious flaws. Yet eliminating the deduction altogether would create its own problems — disproportionately harming high-cost, high-wage areas like Massachusetts.
Making it less attractive to live in America’s most economically productive areas would be a mistake. Any adjustment to the mortgage interest deduction must take account of this pitfall.