We should recognize the dire consequences of our nation’s tax policy, which encourages consumers to amass huge levels of debt when buying a home. Why not reward borrowers who have more equity in their homes instead?
One way to do this would be to provide tax credits to borrowers based on the amount of their down payments. Such a system could be graduated so lower- and middle-income borrowers benefited most, while upper-income borrowers received far less or nothing at all. (Planning a Better Way Than Fannie and Freddie – NYTimes.com, 2/12/2011)
Gretchen Morgenson’s idea would be much less risky than proposed recommendations by Treasury. Get Americans to think like Canadians… putting 10 to 20% down on their home purchases. If abolishing tax credits for mortgage interest payments is another “third rail” for politicians, let’s phase them out by encouraging prudence and thrift. In the end, maybe we’ll start focusing on more productive, less resource intense, investments.