Dept. of Unintended Consequences

Whenever the subject of tax reform comes up, someone suggests eliminating (normally by phasing out over time) the mortgage-interest deduction. Mitt Romney suggested he might like to do that. Will Saletan suggests sunsetting it 30 years from now.

This strikes me as a potentially really, really big decision. The home-mortgage interest deduction has been part of American economic life for a really long time. (Before it was carved out explicitly in 1986, all personal interest payments had been deductible since 1894.)

I assume that a bunch of smart people have created models about what killing the mortgage-interest deduction would do–not just to home prices, but to the overall mix of renters vs. owners, and all of the social indicators that normally get tied up therein. Crime, stability, family formation, fertility, etc.

But I haven’t seen any of that research and I’d be really nervous about enacting such a foundational shift in social policy without doing a whole lot of rigorous analysis as to what the secondary and tertiary effects might be.