Washburn

Reduced or Not, the Mortgage Interest Deduction Can Help Fix Sprawl

As of late, the mortgage interest deduction (MID), a tax break many Americans have become accustomed to, has become the focus of much debate and controversy. It first became the subject of heated discussion when President Obama’s debt commission suggested its reduction. They argued that in addition to reducing deficits, such reform could also help slow the growth of sprawl. The claim was that the deduction encourages people to buy larger homes on larger, exurban lots, and that reducing this subsidy would slow the growth of sprawl. In a previous post, I argued that the MID is only one of many incentives that have made sprawl the predominant form of growth. What’s more, slowing growth does nothing with the huge surplus of sprawl that already exists. If the goal is to effectively deal with sprawl, we will be better served by encouraging its repair through regulatory and financial incentives. Now the MID debate has started anew as President Obama suggested funding portions of the Jobs Act through certain reductions of the MID. And yet again the result has been uproar from all directions. It is obvious that any proposal to reform this all-American “privilege” will be an uphill battle.