Lenders, builders, real estate agents, consumer groups, and many politicians have roundly denounced proposals to eliminate the deductibility of mortgage interest on homeowners' tax returns.

But some economists, a breed apart, have been expressing contrary views. One such view surfaced recently in Economic Commentary, a publication of the Federal Reserve Bank of Cleveland.

If the deduction were scrapped, the article says, upper-income groups would take the biggest hit in housing prices - but would also get offsetting increases in the value of other assets.

The authors are Stephen G. Cecchetti, an economics professor at Ohio State, and Peter Rupert, an economist with the Cleveland Fed. As usual, the article carries a disclaimer that the opinions are not necessarily the bank's.

"Those most affected by removal of the mortgage interest deduction are those who have invested much less of their overall wealth in their homes," the article says.

"If the tax change leads to increased economic growth, then their income from other sources will rise. The value of other assets will also increase as the distorting effects of the preference for owner-occupied housing are taken away."

A centerpiece of the economic analysis is a table showing the distribution of tax savings from the interest deduction by income group. More than 70% of all the savings are realized by households with incomes of $75,000 or more.

Another economist who has raised some questions about the tax advantages of homeownership is Barbara Miles, a specialist in financial institutions for the Congressional Research Service. She also pointed out that the benefits are skewed toward higher-income groups. "The biggest entitlements are for homeowners, which also go disproportionately to upper middle-income households," she said at a recent meeting of the Housing Roundtable, a group of builders, lenders, insurers, and others that sponsors forums on housing issues.

She said one of her colleagues expressed the opinion that "the relatively well-off are so footloose and ne'er-do-well that we have to bribe them into homeownership."

"The biggest problem," she continued, "is that beyond some point, investment in owner-occupied housing is coming at the expense of taxable investment in more productive avenues, which down the road could increase the wealth of society more strongly."

The Housing Roundtable session also brought forth an economist's voice in favor of retaining the mortgage interest deduction. Susan Woodward, former chief economist for the Securities and Exchange Commission and now a consultant, said elimination of the deduction would not be wise, "mainly because it would make housing more expensive for those who do not have accumulated wealth" as compared with those who do.

"It would thus encourage the accumulation of assets by those who already have tangible wealth, and discourage acquisition on the part of those whose wealth takes the form of human capital," Ms. Woodward said. "If your wealth is human capital, then in order to buy a house you have to borrow against that human capital."

The tax deduction makes the cost of owning a home the same for people who on the one hand could simply liquidate assets in order to buy and those who have to borrow against future earnings, she explained.

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