With lawmakers showing little enthusiasm for an ambitious proposal by
This page has repeatedly endorsed the idea of a simpler tax code that broadens the base by thinning the thicket of deductions, exemptions, credits and preferences. Nevertheless, some tax breaks, such as the credit for spending on research and development, are worth keeping because they promote the investments needed to sustain growth over the long term. And other, temporary carve-outs can be an essential part of the government's response to the crisis du jour.
Such is the case with the exemption for forgiven debt on a residential mortgage. Facing a destructive wave of foreclosures, federal and state officials have pressured banks to help troubled borrowers by writing off a portion of their debt. But the
The waiver expired — prematurely— at the end of last year. Although foreclosures have dropped to near pre-recession levels nationally, scattered communities continue to struggle with mortgages failing at double-digit rates. That's why regulators continue to strike deals with banks and mortgage service companies that compel them to forgive billions of dollars in mortgage debt. It makes no sense to have the IRS crushing the same borrowers that the government is trying to save, especially when lenders and neighboring property owners also have a strong interest in averting foreclosures.