Jeffrey Dorfman

Note that those who are winning from the current policy are mostly securing those wins at the expense of some unidentified losers. The additional allocation of spending on homes and mortgage payments means less money is being spent on other forms of consumption (restaurants, vacations, cars, etc.). More expensive houses don’t mean a larger economy because those higher home prices represent a reallocation of spending, not economic growth. That is the textbook definition of rent-seeking: activity designed simply to capture a bigger share of the pie rather than making the pie bigger.
 
 If the mortgage interest deduction is eliminated those harmed will be the people no longer benefitting from a government-encouraged misallocation of resources to the housing sector plus all current homeowners. Homeowners were little effected by the policy while they were both buying and selling houses at artificially inflated prices, and would be similarly held harmless once a new policy was in place and fully established, but there is a transition problem—what economists call an adjustment cost. Anyone unlucky enough to own a house when the policy is changed, even if they don’t have a mortgage or don’t itemize their deductions, will be harmed because they bought at the higher prices encouraged by the tax break and will eventually sell at the lower prices that result from ending the deduction.