The US Congress Joint Committee on Taxation releases two comprehensive reports on the taxation of debt

Date Published 8/5/2011
Author Yefei Wei
Theme Housing Finance Policy

On July 11 the Joint Committee on Taxation of the US Congress released two comprehensive reports on the taxation of debt; one on Business Debt and one on Household Debt.

It is widely believed that the current Tax Code contributed to the severity of the financial crisis both at the household level by stimulating households to increase their mortgage debt levels, and particularly, at the financial institution level by incentivising banks and other financial institutions to “over-borrow” relative to equity. While the regulatory debate focuses on constraining bank borrowing relative to equity, the current Tax Code does the opposite and is biased towards increasing debt holdings by financial institutions.

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