$3)$ Until $2017,$ taxpayers could deduct interest payments on up to $$1$ million of mortgage debt secured by the taxpayer$$s residence. In addition, homeowners could deduct interest on HELOCs of up to $$100,000($HELOCs $-$ home equity lines of credit $-$ are like credit cards secured by the value of a home$).$ Evaluate each of the following tax reforms $($in isolation$)$ on the basis of economic efficiency.

$3\mathrm{.}1)$ The deduction for mortgage interest is replaced with a non$-$refundable credit equal to $15\%$ of mortgage interest payments. The rest of the tax code remains as it was in $2017.$

$[$This is Recitation Q$3$ refocused on efficiency rather than equity$]$

$3\mathrm{.}2)$ The amount of mortgage interest eligible for deduction is lowered to $$500,000$ of debt. The rest of the tax code remains as it was in $2017.$

$3\mathrm{.}3)$ The deduction for interest on HELOCs is eliminated. The rest of the tax code remains as it was in $2017.$

Until $2017,$ taxpayers could deduct interest payments on up to $$1$ million of mortgage

debt secured by the taxpayer's residence. In addition, homeowners could deduct interest

on HELOCs of up to $$100,000($HELOCs $-$ home equity lines of credit $-$ are like credit

cards secured by the value of a home$).$ Evaluate each of the following tax reforms $($in

isolation$)$ on the basis of economic efficiency.

$3\mathrm{.}1.$ The deduction for mortgage interest is replaced with a non$-$refundable credit equal to

$15\%$ of mortgage interest payments. The rest of the tax code remains as it was in $2017.$

$3\mathrm{.}2.$ The amount of mortgage interest eligible for deduction is lowered to $$500,000$ of debt.

The rest of the tax code remains as it was in $2017.$

$3\mathrm{.}3.$ The deduction for interest on HELOCs is eliminated. The rest of the tax code remains as it was in $2017.$