Lowering the cap on the popular mortgage interest rate deduction will have only a small effect on the housing market, according to economist Robert Shiller.
Speaking to CNBC, Shiller said that the deduction, which is currently capped at $1 million for married couples filing jointly and $500,000 for individuals filing separately, is limited to a small percentage of taxpayers. Shiller said that most homeowners use the standard deduction instead.
Shiller said that the change to the mortgage interest rate deduction will have a perceived psychological impact, rather than a tangible one.
"This is part of American culture. It goes back to the American dream," he said. "It stands for something. It stands for 'the government is behind the homeowner.' It's a political thing."
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