The 2005 President’s Advisory Panel on Federal Tax Reform, for instance, concluded that the federal tax deduction for mortgage interest provided an “incentive to take on more debt,” involved large subsidies that encouraged “overinvestment in housing” and was “not shared equally among all taxpayers,” with higherincome households receiving “a disproportionate benefit.” Accordingly, the panel recommended replacing the deductions with tax credits and placing a cap on the benefits as a means of distributing the benefits more evenly and limiting the incentives to take on excessive amounts of debt.
With regard to promoting housing through interest rate policies, I have many times publicly expressed my views about the dangers of using monetary tools and the Federal Reserve’s balance sheet to pursue low interest rates and fund mortgage-backed securities.