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Former Fannie Mae executive vice president and American Enterprise Institute fellow Ed Pinto on whether the mortgage interest deduction has outlived i...
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Tax returns.
He's a hugely popular deductions for billions of homeowners every year.
And it could be changing at a big wave which might have a big impact in the housing industry you're more details of what you need to know is that -- -- -- executive vice president American Enterprise Institute fellow.
Welcome to the show.
-- have a huge impact on housing industry wouldn't.
Well if -- were done right I don't think it would have a huge impact it actually be beneficial.
This deduction has really outlived its usefulness that the lowest interest rates in literally.
100 years -- the value that has declined to declined to declined year over year.
The best thing to do now would be to get rid of it because it distorts the housing market he could do it over ten years phase it out.
And use the money that you save to actually reduce marginal and -- well well which would actually be positive.
Yeah I I mean.
First of all eight in the devil is in that very last detail that you mention of course is would we really use eliminating it.
To lower marginal rates are or would it be just another thing that's that's sucked up to make people pay higher taxes.
Right I mean let's talk about how -- their.
They -- talking Andrea what you think the best way to do it would be that wouldn't be so destructive to the marketing they're talking about right now.
The deduction is up to a million dollars.
They want -- cut that in half to 500000.
What do you think that would mean to the average person because it it does it's a psychological inducement.
To get a lot of people into the market.
Well I think what it is is a psychological inducement for real cures to say by a bit bigger house.
Than you otherwise you buy because uncle Sam's gonna subsidize it and that's just bad policy.
And we've been doing that for many many years.
The idea to converted into a tax credit to help people -- lowering comes just moves the distortion from a high into the market to -- into the market and we've already been through.
Fifteen years of distorting on the low -- and we saw what happened with the biggest run up and collapse in housing prices in our history.
So that this is just bad policy no matter how you look at it this is an opportunity that's being handed to us we should take it I mean low interest rates.
It's not worth this much he can get rid of it over ten years and at the end of the day you -- the devil's in the details you have to use the money there are the lower marginal tax rates.
Yet there -- people the audience right now weeping and throwing wads of paper at the television that you because 65 produce that have been people out there.
Who use this deduction.
Make less and I got out and -- -- bit.
-- was there there of the people who own a home.
As he let -- percent -- yes but but other people use the deduction the vast majority of them.
All make less than a 100000 dollars a year so you're saying that 888.
I mean it would hit a lot of people argue that it would hit people who make less money.
Even harder.
I don't think that's the case because if you look at the standard deduction -- couple it's now up to about 121013.
Thousand dollars.
As if you're making under a 100000 dollars a year.
You get a 121000.
Dollar standard deduction that pays for a lot of interest so at the margin yes you may be paying thirteen.
So you go you falling to the 121000 action you're only gonna get taxed a thousand dollars that's that's a false argument that a lot being perpetuated -- A lot of brokers use this as an excuse to encourage people to get into a bigger home so -- even if that's wrong.
You know and in the sense that you know it's it's not a good reason to get into a bigger hole it would in fact.
Get people to buy it less expensive house.
Wouldn't that be a tough thing to do the market right now when the housing recovery is is just -- legs.
And that the problem is the housing lobby.
Now is never the time over thirty or forty years it's never the time to making policy changes so I look at it and say you've got the lowest interest rates and a hundred years.
House prices are down from where they wore.
And so if you're not gonna do it now you'll never get this stunt of course the housing -- gonna say.
It's going to be horrendous -- it's gonna cause tremendous room look what happened when the banking lobby.
Said that we did away with tagged with the world is gonna end what happened nothing mean again of course that and say that yeah.
Well their interest to say that.
It's in there and -- to say that it only makes sense that the use it to lower marginal rates and lord oh absolutely that's why -- cannot really do you Dario are right thanks coming migrates out.
My pleasure thank you -- --
