Monday, December 10, 2012

David Frum has a good post... on the wisdom of tax deductions. From the piece:

Another large tax preference is the home-mortgage-interest deduction. This preference is justified by the claim that it promotes homeownership. Yet Canada, which doesn’t have the preference, has roughly the same home­ownership rate as the United States: a little over 60 percent.

Rather than put more people into homes, the deduction puts the same number of people into more home: before the Great Recession hit, new homes in the United States averaged 2,300 square feet; new homes in Canada, 1,800 square feet.

That’s bad economics: Americans end up borrowing more to buy houses and then cutting back on other forms of saving to make up for it. The deduction is also bad for the environment, because it encourages Americans to commute farther to bigger houses that require more heating and cooling.

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