Noted economist Mark Zandi believes the housing industry should reverse its long standing support for the mortgage interest deduction and "embrace" a reduction in the tax benefit as a way for the U.S. government to trim deficits and prevent a dangerous increase in mortgage rates.
Moody's Analytics chief economist Mark Zandi noted the government loses $100 billion a year in tax collections due to the mortgage interest deduction. It is the government's second largest tax deduction, he said. Reducing the benefit is a "logical and easy way" to reduce the federal deficit. He also called for reductions in property tax write-offs.
Zandi's comments, as might be expected, didn't sit well with the Mortgage Bankers Association, which told National Mortgage News that the deduction "is an important factor for many homebuyers. With marginal income tax rates expected to increase, it will be an even more important consideration in the years ahead."
But Zandi, in comments made to a U.S. Chamber of Commerce forum in Washington, noted that, "No other sector of the economy has received more support than your industry. It is time to give back."
A bipartisan commission created by President Obama is looking for ways to reduce the federal government's growing deficit, which many consider to be unsustainable.
Moody's chief economist said the housing industry has a "vested interest" in reducing defaults. If interest rates rise, "you will be in a heap of trouble."
