DYSPEPSIA GENERATION

Megan McArdle is always worth reading.

Having recently entered into homeownership, I am now in the unhappy state of having to advocate against my own interest. As someone whose freelance expenses make it worthwhile to itemize, I plan to take the mortgage interest tax deduction until they phase the damn thing out, or I pay off the house, whichever comes first.  But as an economics journalist, I retain my deep hatred for the thing.

The reason we have a mortgage interest tax deduction is that all interest used to be deductible, because way back when the income tax was invented, consumer credit wasn’t really much of a concept, so interest on loans was much more likely to be a business expense incurred in the acquisition of an income-producing asset, rather than a personal expense incurred in the acquisition of a 60-inch flat panel television with built-in Blu-ray player.

I remember being able to deduct my credit-card interest. It made being a Conspicuous Consumer a lot more bearable.

It was fairly obvious that, with the possible exception of the student loans, none of this debt had any connection to an income-producing asset.  So they pencilled out the deductibility of interest payments.  Then they realized what this would do to housing prices, and the mood of taxpayers who had just lost their largest deduction, and pencilled it right back in.

This entry was posted on Saturday, December 4th, 2010 at 15:13 and is filed under Think about it.. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.