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Given the severity of the fiscal problems currently faced by the United States, many recent tax reform proposals have included measures that would curtail or eliminate the home mortgage interest deduction (MID). A new Baker Institute study shows that such measures would initially result in declines in housing prices and investment, but would have only modest aggregate macroeconomic effects in the long run.

The study, "The Dynamic Effects of Eliminating or Curtailing the Home Mortgage Interest Deduction," is co-authored by John Diamond, the Edward A. and Hermena Hancock Kelly Fellow in Public Finance at the Baker Institute, and George Zodrow, the university"s Allyn R. and Gladys M. Cline Chair of Economics, and a Baker Institute Rice Scholar.