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Bad: the federal tax provision that allows homeowners to deduct mortgage interest. On the books in some form for a century, the deduction unfairly favors homeowners over renters, and amounts to a giveaway to the construction and real estate industries.
Worse: The Republican plan to shrink the deduction overnight.
It’s a recurring theme in the House GOP tax plan, which is expected to come to a vote this week. Not every idea in the sprawling plan is so bad, but they add up a harmful bill overall. The tax plan would make changes that might be worth considering — if they weren’t yoked to huge giveaways for the wealthy.
Good features of the sweeping House proposal include expanding the child tax credit. Likewise, season tickets for college sports shouldn’t be deductible. The Republican proposal also changes the method used to calculate inflation to a measure that economists consider more accurate.
But there’s also plenty to dislike. The proposal would take away the deduction for medical expenses, which is vital for a small number of taxpayers with catastrophic medical bills. It also eliminates tax credits for adoption expenses.
And it does not spread the pain equally. Whether the mortgage interest deduction is good policy or not may be debatable, but it’s clear that it affects some regions more than others. Reducing the size of mortgages that can qualify for the deduction from $1 million to $500,000, for instance, would be a particular blow to Greater Boston, where housing prices are high. So would the GOP’s plan to cap at $10,000 the amount of property tax payments that filers can deduct, while eliminating completely the deductions for state and local income taxes.
And for what? The GOP wants middle-class taxpayers to forego deductions so the government can . . . wait for it . . . lower corporate tax rates, abolish the estate tax, and go further into the red. The bottom line of the GOP plan is that it takes from the somewhat rich — and from future generations saddled with more debt — to give to corporations and the very rich.
The Senate GOP is expected to unveil its own tax overhaul proposal soon. Hopefully they’ll do better, because the House bill is way too flawed to support.
If Congress wants to tackle a thorny issue like the mortgage interest deduction, they need to do it with a serious bipartisan effort. Any change should be phased in. It should also apply equally to all homeowners. (The House plan grandfathers in existing mortgages, a provision that is apparently designed to make the bill more politically palatable but will distort the housing market even more.) And the reclaimed revenues should go to housing uses, not tax breaks for the rich.
If the GOP sticks to its artificial deadlines and continues to sideline Democrats, this bill is probably beyond repair. Nobody thinks the current tax code is perfect, but Congress may need to reform its own partisan ways before it can reform taxes.
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