Tax Policy Changes: A Case Study of the Home Mortgage Interest Deduction

The home mortgage interest deduction, also referred to as the MID, has remained relatively unchanged since its implementation in 1913. Recently however, it has come under scrutiny for being one of the most costly deductions for the Internal Revenue Service (IRS). This paper examines the deduction and how it is used by individuals, with a special focus on middle income individuals, as well as how its elimination will affect the economy overall. Currently the IRS estimates that it will be able to generate $70 billion in additional revenues by eliminating the MID; however, the adverse short-term and long-term effects of eliminating the MID will offset most estimated increases in tax revenue