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Ground Level Blog

How would cuts to mortgage deductions affect Baldwin?

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One of the proposals recently released by President Obama's deficit commission would eliminate the availability of deductions on second homes and home equity loans, as well as lower the cap for mortgages eligible for deductions from $1 million to $500,000.

Some writers and politicians are even suggesting the U.S. get rid of mortgage interest deduction entirely. There are several reasons for the suggested change of pace, including the facts that the current policy primarily benefits those with high enough incomes to allow for itemization and that it fails to accomplish it's main goal of increasing home ownership.

Ken Archer from the Greater Greater Washington blog uses a graph to compare rates of home ownership within several countries. While places without these types of subsidies, such as Ireland, Italy and Australia see rates of 83 percent, 78 percent and 69 percent respectively, the four countries with these types of mortgage interest deductions see considerably lower rates. The U.S. rate is highest, at 65 percent, followed by Sweden's at 60 percent, the Netherlands' at 49 percent and Switzerland's, which is lower than 43 percent, the lowest rate on the chart.

As he concludes, offering the world's biggest mortgage deductions isn't making the U.S. home ownership rate highest.

If either of these budget cuts go through, how will they affect Baldwin?

Will it make it even more difficult to fill some of township's already vacant homes or yet-to-be-populated lots? Or could it be a step toward a more resilient future, by encouraging growth that is tethered more closely to the market?

The Economist blog offers an alternative idea to subsidize home purchases in the form of a tax credit issued for the purchase of a home, as opposed to the acquiring of mortgage.

An incentive such as that could encourage new home ownership in Baldwin.

Are you in favor of subsidies for home ownership, or should the U.S. cut them to help balance the budget?