Now that I’ve gotten that out of my system … a real debate of policy and principle in what’s left of the GOP presidential primary.
As the Political Insider already noted, Newt Gingrich is chiding Mitt Romney for his reported idea of limiting the tax deduction for second homes, based on income. Gingrich calls this a violation of “the classical American definition of fairness — that every American be treated equally under the law” and uses the occasion to highlight his proposal for an optional flat tax of 15 percent on individual income.
I agree with Gingrich in the broad sense and in the long run, but I think Romney is just fine in the short run.
The mortgage-interest tax deduction is nothing but a federal subsidy for homebuyers. Period. (Full disclosure: My wife and I are among the millions of tax filers who claim the deduction on our tax return each year.) In an ideal world, we would eliminate it and all other deductions, and offset the change by lowering tax rates — so that we’re not favoring the purchase of homes over other goods and services, but also not raising people’s taxes. The real economic potential lies not in incentivizing certain purchases, but in encouraging economic growth by lowering marginal tax rates.
Even if one argues there’s a compelling federal interest in encouraging homeownership, it is good public policy to stop subsidizing the purchase of second homes, and particularly for high earners — just as conservatives ought to favor the elimination of other government subsidies. If beginning the phase-out is part of how a President Romney would offset his plan to lower income-tax rates by 20 percent across the board, I think that’s very much an acceptable start. (For those who say we should cut spending to offset that plan: In my view, subsidizing the purchase of second homes through the tax code is spending by another name.)
I’m not sure Romney, who has already pivoted quite clearly to the general election as the presumptive Republican nominee, will want to respond to Gingrich directly — and signal there indeed is unfinished business in the primary. But it might behoove him to talk about this issue more generally as a way of both fleshing out his own thoughts and continuing to reach out to conservative voters, as some activists on the right believe he still needs to do.
– By Kyle Wingfield