THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Tuesday, August 22, 1995 TAG: 9508220016
SECTION: FRONT PAGE: A12 EDITION: FINAL
TYPE: Editorial
LENGTH: Short : 39 lines
Reducing the federal-budget deficit won't be achieved in one fell swoop but by cutting a little here and a little there. Some of the cuts will have to be in entitlements and tax breaks. Ways to save money on Social Security and Medicare are now being discussed. So is a lower cap on the previously untouchable mortgage-interest deduction.
Interest on mortgages of $1 million or less is now deductible. It's a subsidy that costs the government $51 billion a year. Fans argue that it has helped generations of Americans to realize the dream of home ownership. Critics contend it keeps interest rates artificially high, which harms everyone.
There is a way to continue to help 95 percent of households to become home owners while reducing the deficit by almost $25 billion a year. The solution is to cap the size of the mortgage that can be deducted at $100,000.
Presently, only 5 percent of households have a mortgage of more than $100,000, according to figures from the U.S. Joint Committee on Taxation. Yet that 5 percent accounts for 45 percent of the dollars claimed as deductions. By lowering the cap from $1 million to $100,000, only 1 household in 20 would be affected but half the subsidy would be saved.
As this example suggests, it isn't necessary to wipe out whole programs or to destroy entitlements or tax benefits to make significant reductions in the deficit. It is necessary to make rational adjustments on the basis of greatest need. Lowering the mortgage-deduction cap is well worth exploring since it would save large sums but inconvenience relatively few people. Making second, vacation homes ineligible also seems like a reasonable sacrifice at a time of $200 billion deficits. by CNB