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 |
| Country |
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.