The Organization for Economic Cooperation and Development (OECD), an international organization of 32 industrialized, market-economy countries, has recommended that the U.S. either reduce or terminate mortgage interest tax deductions as a means to spur recovery from the recession.
According to its latest U.S. Economic Survey, the OECD has determined that the U.S. economy is beginning to recover – but it has entered a ‘soft patch’ that is complicated by an ‘unemployment rate [that] is likely to stay above the pre-crisis level for an extended period and long-term unemployment.’ OECD Secretary General Angel Gurria praised President Obama's establishment of the bipartisan National Commission on Fiscal Responsibility and Reform as helping to guide the economy forward.
‘Even if measures are to be implemented only at a later stage, spelling them out now is an important signal,’ says Gurria.
However, the OECD recommends a change in U.S. tax policy relating to mortgage interest deductions.
‘The mortgage interest deduction should be reduced or eliminated, as it encourages large home mortgages,’ the OECD report says. ‘There is little evidence that it leads to more people owning homesâ�¦though it does create an incentive for buying more housing. The mortgage interest income-tax deduction should be replaced by a home-buyer savings account scheme where the government provides matching contributions to encourage access to homeownership. The policy could be phased in during the period from 2013 2018 to allow the housing market to stabilize.’
The full report is available online.