Presidentis a rare policy expected to draw political support from both sides of the aisle. But one aspect of the overhaul could doom it: a White House move that would effectively eliminate the mortgage-interest deduction, a perk cherished by millions of homeowners around the U.S.
If some version of Mr. Trump’s plan is adopted, all but the wealthiest Americans will no longer be able to deduct the interest paid on a home loan. That’s great news for proponents of rational markets, while potentially saving the U.S. government nearly $70 billion a year. But it would be bad news for current mortgage holders.
A separate analysis commissioned by the National Association of Realtors puts the immediate effect of a Trump-like tax cut at a 10 percent drop in home values.
While that would harm home sellers, a drop in housing costs would be welcome news for buyers, especially when combined with other elements of the White House tax plan: lowering overall tax rates and increasing the standard deduction. Those changes would likely result in more take-home income for ordinary taxpayers (not to mention the disproportionate benefits they would deliver to the highest earners).