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Billions Of Tax Dollars Spent Inflating The Housing Bubble: How And Why The Mortgage Interest Deduction Failed, Rebecca N. Morrow
Billions Of Tax Dollars Spent Inflating The Housing Bubble: How And Why The Mortgage Interest Deduction Failed, Rebecca N. Morrow
Fordham Journal of Corporate & Financial Law
The mortgage interest deduction is an incredibly popular, politically well-supported and hugely expensive tax incentive. Yet economic studies consistently show that the mortgage interest deduction fails to advance its fundamental purpose. It does not increase the rate of homeownership. On the contrary, to the extent that it is effective in influencing human behavior, it does so by inflating home prices and encouraging borrowing against equity. These effects – inflated home prices and excessive borrowing – contributed to the economic crisis of 2008. In the years leading up to the crisis, Americans spent billions of tax dollars further inflating a dangerously …