by Curtis S. Dubay
The Heritage Foundation
February 19, 2014
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 - 2015 The Heritage Foundation