Sunday, October 28, 2012

Tax Expenditure Fact of the Day

The NY Times reports:
[T]he people who tend to derive the greatest dollar benefit from the mortgage interest deduction are households earning $100,000 to $500,000 a year.  
“About two-thirds of the total benefit go to that group in the 80th through the 99th income percentiles,” Mr. Rosenberg said.  
For those households, by the center’s calculations, the tax benefit of the deduction amounts to about 1.5 percent of after-tax income. By way of comparison, the value to households earning $40,000 to $50,000 is closer to 0.3 percent of after-tax income; for households earning $50,000 and $75,000, it is 0.7 percent.
These numbers compare the status quo to a system without any mortgage deduction at all.  If instead we lowered the size of the mortgage eligible for this deduction from the current $1 million to, say, $250,000, the base broadening would have an even smaller effect on middle-income housholds.