Saturday, January 22, 2011

Messing with a sacred cow

This interesting article from McClatchy compares the Canadian housing market and lending policies with those in America. Not a single bank in Canada failed during the financial crisis, and less than one percent of all mortgages are under threat of default. Things are very, very different in the U.S.

The articles looks at a number of things the Canadians did to not screw up. The most significant thing that caught my eye was the fact that Canada offers no tax write-offs for interest paid on house mortgage payments unlike America where homeowners enjoy the deductions provided by the federal government ostensibly to promote home ownership. However:
..even without a mortgage-interest deduction, Canada's percentage of home ownership at 68.4 percent is comparable to U.S. home ownership rates.
I have always found the interest write-off to be unfair and ass-backwards. Unfortunately, it is too popular with the voter bases of both parties, which makes is somewhat of a untouchable subject and unlikely to go away easily.

But then, there is much noise from House Republicans now in a majority about sweeping changes to make the government smaller and simplifying the tax code. Well, the interest write-off is a perfect example of social engineering, something Republicans would not like to be seeing doing. Very good reason to tackle it. Deficit hawks should also take note.

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