Bringing down the house
Pittsburgh's leading policy wonk Fester discusses the proposal to reduce the cap for the mortgage interest federal tax deduction in order to eliminate the alternative minimum tax. Fester favors the idea because the deduction leads to overinvestment in the housing market, but he feels it is a political nonstarter because it will cause too much short-term pain.
I tend to agree on both counts. I think the deduction as it currently stands is an indirect cause of sprawl, as it encourages people to build new homes rather than rehab older ones, and it allows people to build bigger homes on bigger lots than they could otherwise afford. But it has a huge political constituency that would mount a hell of a fight to keep the ceiling where it is.