If you have a mortgage on your home, you can deduct the interest from your taxes. It's a popular, well-entrenched policy. But according to one policy adviser to a U.S. senator, "the mortgage-interest deduction, from a purely policy perspective ... makes no sense."
It's a view that's supported by a mountain of academic research: The mortgage-interest tax deduction benefits the rich more than the poor, has little effect on home ownership and isn't even really a bargain for homeowners because it raises home prices.
So do policy advisers tell members of Congress to fight the mortgage-interest tax deduction?
"If you're relatively green in Washington, I suppose that happens. And I suppose you're laughed at," said the adviser, who preferred not to give his name for fear of losing his job. "The mortgage-interest deduction is a sacred cow."
Everyone in Washington, D.C., knows that there are many powerful forces making sure that no one ever suggests getting rid of the mortgage-interest deduction. Jimmy Williams, a former lobbyist for the National Association of Realtors, was one of those forces.
"If I were at the Realtors right now, I'd declare war" on anyone who tried to get rid of the deduction, Williams says.
He would run ads, encourage Realtors across the country to make phone calls and give money to the most powerful legislators in Washington. "And then you sit back and just say, 'You really want to go down this path? That's just not a really smart way to run for re-election.' "
Jamie Gregory, who currently lobbies for the Realtors, says if you got rid of the deduction tomorrow, home prices would fall all over the country, which would destabilize the economy. And besides, he says, the biggest lobby in favor of the deduction is homeowners.
"For middle-class Americans, either doing away or limiting the mortgage-interest deduction is going to be a tax increase," he says.
People who have bought a house assuming they'll get a break on their taxes each year want that tax break. They might not be able to afford the house they're in without it.
Of course, you could phase out the deduction out over time, making it apply only to future homebuyers. Who knows what solutions smart policy staffers in D.C. could come up with — if they weren't afraid of being laughed at for being so naive?