Tax Policy Center Report on MID Reform Posted

The Tax Policy Center (TPC), a joint project of the Urban Institute and the Brookings Institution, recently completed a new analysis for NLIHC to determine the impact of proposed changes to the mortgage interest deduction. TPC posted its analysis on its website on March 18. Entitled Options to Reform the Deduction for Home Mortgage Interest, the paper shows the results of lowering the cap on the size of a mortgage for which interest can be deducted to $500,000 and converting the deduction to a 15% tax credit and a 20% tax credit. Ten-year revenue projections are provided for both the 15% and 20% credit, assuming immediate implementation and a five-year phase-in. This year’s analysis shows smaller revenue projections with these changes than did the similar analyses TPC did for NLIHC in 2011 and 2012. The reduced projections is due to the changes in the tax code in the American Taxpayer Relief Act of 2012 (ATRA) and continued low interest rates, among other reasons. These findings are similar to that of the Joint Committee on Taxation in its February 1, 2013 report on tax expenditures (see Memo, 2/01/13). The new analysis shows that a 20% tax credit would actually cost more than the mortgage interest deduction under current law. The 15% tax credit, if fully implemented in 2014, would raise $213 billion in ten years. If phased in over five years as NLIHC proposes, the 15% tax credit would raise $197 billion over ten years. This analysis served to inform Representative Keith Ellison in the drafting of H.R. 1213, the Common Sense Housing Investment Act of 2013.Click here to read the full report (PDF).