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Mortgage Interest Deductibility and Housing Prices

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Over the past few years, there have been several proposals for replacing the income tax system with a system based on taxing consumption. Many of the proposed reforms include eliminating the deductibility of home-mortgage interest, but this provision raises a question: Since the deduction subsidizes home ownership, will eliminating it substantially reduce the value of owner-occupied housing?

Over the past few years, there have been several proposals for replacing the income tax system with a system based on taxing consumption. Many of the proposed reforms include eliminating the deductibility of home-mortgage interest, but this provision raises a question: Since the deduction subsidizes home ownership, will eliminating it substantially reduce the value of owner-occupied housing?


Suggested citation: Cecchetti, Stephen G., Peter Rupert, 1996. "Mortgage Interest Deductibility and Housing Prices," Federal Reserve Bank of Cleveland, Economic Commentary, 02.01.1996.

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