University of California Davis Law Review
U.C. Davis L. Rev.
The home mortgage interest deduction is over 100 years old. The deduction has been subject to increasing and, at times, withering criticism from commentators. Scholars have argued that the mortgage interest deduction may be a particularly ineffective and regressive way to subsidize homeownership. Other scholars have made the important point that the mortgage interest deduction has a disparate racial impact: homeowners are disproportionately white, so the deduction disproportionately benefits white people at the expense of people of color. Yet, the mortgage interest deduction has retained remarkable and costly staying power despite all the critiques.
How has the mortgage interest deduction persisted over a century, despite extensive critique? We argue that an underappreciated part of the story of the mortgage interest deduction is how its very creation arose out of implicit racial bias and other cognitive biases. First, scholars and policymakers ignored the racialized history of homeownership in the United States and relied on racist tropes in studying the potential economic benefits of the deduction. After such associations occurred, policymakers misattributed to homeownership benefits that were really, at least in part, benefits that flowed from whiteness. Perceiving positive benefits from homeownership, legislators viewed it as a good worth subsidizing through the tax system. Cognitive biases such as confirmation bias then made it unlikely that, once in place, the mortgage interest deduction would be substantially changed.
his understanding of the mortgage interest deduction should upset any future attempts to characterize the deduction as a neutral, albeit flawed, way to subsidize desirable values. More generally, this case study illustrates a phenomenon that merits more attention in the legal literature: how implicit racial bias and other cognitive biases in the legislative process make flawed legislation, like the mortgage interest deduction, more likely to be made and more difficult to upend. We conclude by offering suggestions for minimizing bias in future legislation and for reforming existing legal policy that already reflects such bias.