Question

8 Extend our definition of tax reform to the mortgage interest deduction, which was not eliminated in the 1986 reform and all subsequent budgets. Give a case for and against a tax reform that lowers all marginal rates, satisfies the three principles of tax reform and eliminates this deduction in terms of efficiency and fairness?

Answer 1

Mortgage interest deduction is tax reform that allows consumers to deduct interest on any loan used to purchase, build or make improvements to residence.

The 3 principles of tax reforms include efficiency and simplicity and fairness.

In India, RERA is one such tax reform which has significantly lowered taxes paid on property through various amendments and completely satisfies three principles of tax reform. It also eliminates mortgage interest deduction. Tax reform is highly simplified and transparent and has committe for checkingvof unlawful practice.

US recently in 2017 implemented TaxCut and Job Reform which will increase marginal rates and make housing costlier and will also allow mortgage interest deduction. This will increase unlawful activities and expose loopholes to fund tax benefits and various deduction thus violating 3 principles of Tax reforms.