WHAT ABOUT THE MORTGAGE INTEREST DEDUCTION

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ProfessorAnnette Nellen has some thoughts on “Tax Reform and the Mortgage Interest Deduction” at 21st CENTURY TAXATION.
Herbottom line -
“To keep lower tax rates, remove inequities,remove economic distortions, simplify the law and reduce the debt and deficit,I recommend:
·     Phase-out the home equity interestdeduction over 5 years.
·     Phase-out the deduction for intereston a vacation home over 5 years.
·     Phase-out the $1 million debt limiton acquisition debt over 5 years. Drop it to $500,000 adjusted annually forinflation.
·     Convert the deduction to a taxcredit.”
Theidea of doing away with this deduction is not new.  In a post from June of 2010 I noted –
“Howard Gleckmanposed the question “Should We Dump the Home MortgageInterest Deduction?” at TAXVOX, the blog of the Tax PolicyCenter.

Kay Bell added her two cents to Howard’s commentary in “Is It Time to Kill the MortgageInterest tax Deduction” at DON'T MESS WITH TAXES.

A recent tweet led me to the article “Mortgage Deduction: America'sCostliest Tax Break” By Jeanne Sahadi at CNNMoney.com fromApril.”
WhileI support doing away with the deduction for mortgage interest on 2nd homes andhome equity interest, and would do it “cold turkey” and not via a phase-out, Ihave always wanted to keep the deduction for interest on loans to buy or buildyour personal residence.
Here is what I said about the deduction in my post “THE NEW TAX CODE - INTEREST AND TAXES"
“The Internal Revenue Code taxes Americansbased on income measured in pure dollars. However it is a fact that the “value”of one’s level of income differs, sometimes greatly, based on one’sgeographical location. A family living in the northeast (New York, certainlyNew Jersey, and Connecticut) or California that has an income of $150,000 maybe just getting by, while a similar family that resides in “middle America”lives like royalty on $150,000. Many components of the Tax Code are indexed forinflation, but nothing is indexed for geography. To be honest I have no ideahow one would even begin to index for geography.
It costs an awful lot to live in,for example, New York, certainly New Jersey, Connecticut, and California. Stateand local income and property taxes are the highest in the country. The cost ofreal estate is also excessively high. As a result one must earn a lot moremoney to be able to live in these states – and salaries are arbitrarilyincreased to reflect the increased cost of living. Yet $150,000 in income istaxed by the federal government at the same rate in New York City as it is inHope, Arkansas.
Taxes and the cost of a home, andtherefore also the amount of “acquisition debt” mortgage interest paid on aresidence, are higher in the Northeast, and California. Since we pay taxes on“net income” after deductions, allowing an itemized deduction for these itemswould help to somewhat geographically “equalize” the tax burden.”
Thisis the same reason I would keep the deduction for real estate and state andlocal income taxes.
Ihave seen no talk about this geographic inequity in the tax reform debate.  Am I the only one who sees it as anissue?   Please let me know your thoughtson the subject.
TTFN