Report: Key Mortgage Tax Break Just Helps the Wealthy
Lawmakers are fiercely protective of popular interest deduction
By Kevin Spak, Newser User
Posted Mar 24, 2014 2:49 PM CDT
This undated photo shows a mansion that, at the time, was for sale.   (AP Photo/ TK Images)

(Newser) – The tax code is rife with home ownership incentives that are both popular with voters and staunchly defended by lawmakers. But it turns out the breaks mostly just help rich people buy pricier houses, according to a new report from the right-leaning R Street Institute. They "don't encourage homeownership in any meaningful way," the study's author tells the Wall Street Journal. "People just end up buying larger homes." He estimates that in Washington, DC, the subsides have increased the average home size by 1,400 square feet.

What's more, the tax breaks are mainly going to the wealthy; homeowners with incomes above $100,000 are four times as likely to claim the benefit as those earning less, because low earners rarely itemize their deductions. It's the kind of report that can anger the right and the left alike. Matt Welch at Reason calls the tax breaks an "upper class entitlement," while Hamilton Nolan at Gawker calls it a "grotesque policy outcome." Barack Obama has repeatedly called for making the benefit available only to those making less than $200,000 a year.

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Showing 3 of 103 comments
ChuChu
Mar 25, 2014 8:20 AM CDT
Is the guy whom wrote this article brain dead? We aren't anywhere near wealthy. Neither were my WWII veteran working class parents. We don't own - nor did my parents - any kind of luxury home. Our is a 60+ year old bungalow. The interest tax deduction makes owning a home possible for us...IT MAKES A HUGE DIFFERENCE..It especially did at the beginning when taking on the house payment (and the huge amount of interest on a 30 fixed) is daunting. You can change your withholdings on your paycheck and bring more money home to help with that house payment. At the end of the tax year when the scales are balanced, your still sitting better off on your taxes than renting. The author of this article is spreading MISINFORMATION. Whomever takes out a mortgage and then doesn't itemize is simply moronic. Perhaps the tax break should be limited to one's primary home only. No second homes, no recreational vehicle (yes, that's right, you can write off the mortgage interest on an expensive R.V.). Abuse of the mortgage tax break by some wealthy swindler does not mean it holds no benefit for those "regular folk" whom wanting to stop paying rent into a black hole. Does the author of this article own rental properties, maybe?
FarmerMichael
Mar 25, 2014 4:48 AM CDT
I'm not rich by any means. Yet I've long benefited from declaring my property tax and mortgage payments, as the two alone get me past the standard deduction levels on the 1040 federal form. So what is this bit about how this only benefits the rich? Now I can see limiting the deduction to one house or a certain figure of interest. But this deduction is why over 60% of US citizens are home owners...does that sound like the top 1%? Taking the tax down totally will mean a lot of construction jobs will just disappear and you are to a Scandinavian model where no one buys a home with less than 30% down. That is not how our past economic models have prospered. Tread carefully, please. Yes, there are abuses. But the baby is in this bathwater.
Naked_Emperor
Mar 24, 2014 10:56 PM CDT
There shouldn't be ant tax deductions PERIOD. Not for kids, not for mortgages, not for medical expenses. And businesses shouldn't get deductions either. They earn a dollar they pay taxes on a dollar. No expense deductions, no loss deductions, etc.