Excerpt: Question 1
The McMansion Tax Break

Return to Excerpt List

Taxpayers can deduct interest on loans of up to $1 million used to buy one or two personal residences.

Ask the Candidate:

Would you limit the home mortgage interest deduction so that it subsidizes the purchase of one basic home, and would you redirect some of the tax savings to help qualified renters purchase a basic home?

We all know how important it is to have a secure and affordable home. Congress knows the advantages to society if neighborhoods are stable and if residents take responsibility for their property and community life. Homeownership, so integral to the American dream, serves both goals. Furthermore, owning a home usually is a good investment.

It should not surprise us, therefore, that Congress would wish to provide tax incentives aimed at maximizing the number of homeowners. But the considerable tax breaks for homeownership under existing laws, while highly popular, make neither social nor economic sense.

The three largest tax breaks—the deduction for mortgage interest, the deduction for property taxes, and the tax exemption for our capital gain when we sell our home—cost the government a staggering $110 billion annually. Yet the great bulk of those tax savings go to people who could easily afford to own a basic home without federal assistance. Nowhere is this more apparent than with the mortgage interest deduction, by far the largest subsidy, which extends to home mortgages totaling as much as $1 million per taxpayer.