Ben Carson’s tax plan is a disaster. A flat tax that the former neurosurgeon and current 2016 GOP candidate likens to religious tithing, it would blow a hole in the federal budget worth trillions of dollars and be monstrously regressive.
But it does get one thing right, which he reiterated during Tuesday’s fourth Republican primary debate, hosted by the Fox Business Network. Carson would eliminate all deductions under his plan, including the mortgage interest deduction; during the debate, he noted “there are a lot of people who say, if you get rid of the deductions, you ruin the American dream, because, you know, the mortgage interest deduction. But the fact of the matter is, people had homes before.”
Like the proverbial stopped clock, Carson has hit on one solid idea.
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The mortgage interest deduction is one of the country’s most expensive tax breaks, costing some $70 billion annually. And the vast bulk of the benefits goes to the very richest Americans; even close to half of those who have a mortgage receive no benefit from it at all, because it’s better for their finances to use the standard deduction anyway. As University of Texas Law Professor A. Michele Dickinson has written, “Though the mortgage interest deduction theoretically increases Americans’ access to homeownership, in reality, it mostly subsidizes housing costs for upper income Americans.”
That “theoretically” is important, as there’s precious little real evidence that the deduction has done much of anything to boost American homeownership. In fact, plenty of other countries that don’t allow the deductibility of mortgage interest at all have higher home ownership rates than does the U.S. Some economists even think the homeownership rate in America is lower than it would have been if we didn’t have the tax break at all. Looking across the pond, when the U.K. phased out its own deduction, its homeownership rate actually went up.
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But cost and fairness aren’t the only problems. The mortgage interest deduction also plays into America’s cult of homeownership, a bipartisan love fest that has paid few dividends. It’s not that homeownership is bad, of course; it’s just that the government has gone far out of its way to make owning a home the be-all, end-all of the American dream, despite the fact that it’s not necessarily for everyone.
The trouble with eliminating the mortgage interest deduction, though, is that people love it. There’s a reason Kentucky Sen. Rand Paul, when asked about his own flat tax proposal during the debate, made sure to note that he would keep it (along with the deduction for charitable giving, which Carson also said he would eliminate). Just about every tax plan, no matter how radical, preserves the mortgage interest break.
Essentially, Carson has grabbed a hold of the third rail of American tax policy. It probably won’t win him many admirers outside of economic circles, but in a generally terrible plan, it’s one bright spot for which he deserves kudos.
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What Ben Carson Got Right About Taxes in the 4th Republican Debate originally appeared on usnews.com
