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Investments / Lending

Tax Foundation: End of mortgage deduction equals 659,000 jobs lost

Truth or scare tactics?

July 29, 2013

The mortgage interest deduction remains the hot potato of tax reform and U.S. deficit debates.

To cut it, or not to cut it, that is the question.

If you accept new research that the Tax Foundation – a nonprofit that focuses on tax reform – released, the end of the MI deduction will stifle economic growth, causing the economy to shrink by $254 billion and the nation to lose 659,000 jobs. Wages also would fall at least 1.1%, the agency suggests. All of this, of course, would result from the loss of the deduction because it would kill spending power and growth.

 "The mortgage interest deduction is a controversial provision and there are legitimate policy arguments beyond just its impact on revenue for whether it should be retained or eliminated," said Tax Foundation Fellow Dr. Michael Schuyler. "For the purposes of our estimate, however, we’ve set aside questions of encouraging home ownership or unequal investment treatment and focused on the impacts on economic growth."

In order for an elimination of the deduction to make any sense, the Tax Foundation determined it would have to be paired with other tax cuts to make up for a loss in economic growth. The group claims that it would take a 6.8% income tax cut across the board and write-offs for new equipment at small businesses to make up for growth lost due to the end of the MI deduction.

The Tax Foundation is not the only organization with a dog in this fight.

The Mortgage Bankers Association previously went to bat for the mortgage interest deduction.

Click here to read the full Tax Foundation report.

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