WASHINGTON -- One of America's most popular tax breaks is about to be rendered nearly useless. And there are few economists rushing to defend it.
The $64 billion mortgage-interest deduction has long been touted as fuel for U.S. homeownership. Yet as the real estate industry fights the Republican tax plan that's set to diminish its use, finding economic supporters of the perk is tough, even among affordable-housing advocates. John Weicher, a 79-year-old former official with the Department of Housing and Urban Development, says he's one of the few who believes in the break.
"We're about as common in the economics profession as Republicans are in the District of Columbia," said Weicher, now director of the right-leaning Hudson Institute's housing center in Washington, a city where only about 4 percent of voters chose President Donald Trump in last year's election.
While Republican lawmakers aren't directly killing the mortgage benefit, their tax plan would make it worthless for most homeowners by doubling the federal standard deduction, making it less likely that a typical person would itemize write-offs of any kind. Almost 38 million American households who would otherwise itemize would opt for the standard deduction under the new tax plan, according to Moody's Analytics Inc.
The bill's passage would be one of the greatest defeats for the National Association of Realtors, Washington's second-most powerful lobbying group, which had for decades successfully fended off criticism of the benefit. Detractors argue that the tax perk inflates home prices for first-time buyers and favors families with bigger incomes and bigger mortgages (including for discretionary vacation-home purchases).
It's "not an effective way to support homeownership," Mark Zandi, chief economist for Moody's Analytics, said of the mortgage-interest deduction, or MID. "I think my views on the MID are in the consensus."
Opposition to the deduction has created strange bedfellows.
In February, Diane Yentel, chief executive officer of the National Low Income Housing Coalition, and Mark Calabria, then working at the libertarian Cato Institute, co-wrote a column in The Hill calling for Congress to kill or reform the deduction.
"No longer a political 'third rail,' experts from across the ideological spectrum are increasingly calling it what it really is: a wasteful use of federal resources," they wrote.
When the column ran, Sarah Mickelson, director of public policy for the NLIHC, said she got surprised emails from colleagues that her organization could find something to agree on with Calabria, who's now the chief economist for Vice President Mike Pence.