by Curtis S. Dubay
The Heritage Foundation
February 19, 2014
Backgrounder
There is frequent talk of Congress abolishing interest deductions like the mortgage interest deduction (MID). Policymakers would do so either as a way to pay for lower marginal tax rates in a tax reform package or through loophole closing to raise taxes so the government can spend more. The desire to abolish interest deductions is usually rooted in a widely held misbelief that they are subsidies for borrowing. In fact, they are not subsidies, but an integral part of a neutral tax system, meaning that they neither encourage nor discourage particular activities. Interest deductions maintain neutrality by establishing symmetry between lenders and borrowers. By abolishing them, Congress would create a disincentive to invest that would reduce job creation and wages. Congress should keep interest deductions including the MID.



Heritage FoundationInsiderOnline is a product of The Heritage Foundation.
214 Massachusetts Avenue NE | Washington DC 20002-4999
ph 202.546.4400 | fax 202.546.8328
© 1995 - 2014 The Heritage Foundation