Under current law, homeowners get a big tax break: The details of the tax break really don’t matter as much as the mere fact that if you make mortgage payments on a home that you live in, your taxes will be lower than otherwise.

a. Suppose that Congress eliminated the tax break for homeowners. What will this law do to the demand for homes: raise, lower, or have no impact? 65pg

b. What will be the net effect of eliminating the break on the price of houses?

c. Given your answers to parts a and

b, comment on who gets the benefits of the tax break. Is it people who buy homes? Sellers? (Be careful, sellers were buyers once!) Why could eliminating the tax break prove difficult?