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The Distributional and Revenue Consequences of Reforming the Mortgage Interest Deduction

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  • Cole, Adam J.
  • Gee, Geoffrey
  • Turner, Nicholas

Abstract

The mortgage interest deduction (MID) is costly, and half the benefits accrue to the top 10 percent of taxpayers. This paper analyzes how five modifications to the MID would affect federal individual income tax revenue and the distribution of the tax burden. Under full repeal, federal individual income tax revenue is estimated to increase by up to $1.3 trillion, equal to 0.7 percent of GDP, between 2012 and 2021. Converting the deduction to a 15 percent non-refundable credit could increase federal individual income tax revenue by up to $599 billion, equal to 0.3 percent of GDP, over this period.

Suggested Citation

  • Cole, Adam J. & Gee, Geoffrey & Turner, Nicholas, 2011. "The Distributional and Revenue Consequences of Reforming the Mortgage Interest Deduction," National Tax Journal, National Tax Association;National Tax Journal, vol. 64(4), pages 977-1000, December.
    • Handle: RePEc:ntj:journl:v:64:y:2011:i:4:p:977-1000
    DOI: 10.17310/ntj.2011.4.04
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    References listed on IDEAS

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    1. Martin Gervais & Manish Pandey, 2008. "Who Cares About Mortgage Interest Deductibility?," Canadian Public Policy, University of Toronto Press, vol. 34(1), pages 1-24, March.
    2. Anderson, John E. & Clemens, Jeffrey & Hanson, Andrew, 2007. "Capping the Mortgage Interest Deduction," National Tax Journal, National Tax Association;National Tax Journal, vol. 60(4), pages 769-785, December.
    3. Hendershott, Patric H. & Pryce, Gwilym, 2006. "The sensitivity of homeowner leverage to the deductibility of home mortgage interest," Journal of Urban Economics, Elsevier, vol. 60(1), pages 50-68, July.
    4. Christian A. L. Hilber & Tracy M. Turner, 2014. "The Mortgage Interest Deduction and its Impact on Homeownership Decisions," The Review of Economics and Statistics, MIT Press, vol. 96(4), pages 618-637, October.
    5. Steven C. Bourassa & Ming Yin, 2008. "Tax Deductions, Tax Credits and the Homeownership Rate of Young Urban Adults in the United States," Urban Studies, Urban Studies Journal Limited, vol. 45(5-6), pages 1141-1161, May.
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    Cited by:

    1. Wodon, Quentin, 2014. "Comparing Itemized Tax Deductions across States: A Simple Decomposition Applied to Mortgage Interest Deductions," MPRA Paper 56940, University Library of Munich, Germany.
    2. Ghoddusi, Hamed & Afkhami, Mohamad, 2019. "Valuation of mortgage interest deductibility under uncertainty: An option pricing approach," Journal of Economic Dynamics and Control, Elsevier, vol. 103(C), pages 102-122.
    3. David Splinter, 2019. "The Mortgage Interest Deduction: Causes of Fluctuations in a Procyclical Tax Expenditure," Public Finance Review, , vol. 47(5), pages 807-827, September.

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