laissez-faire redistribution
Eduardo Porter does the math in the Times today:
The mortgage interest deduction, the biggest single subsidy to homeowners, will cost the federal budget about $80 billion this year, according to the administration’s projections. Deductions for state and local property taxes will cost $15.5 billion.
Allowing homeowners to pocket tax-free much of the profit from selling their homes is expected to cost $37 billion more. Altogether, this amounts to almost 5 percent of the federal government’s total tax revenue, and almost three times HUD’s entire $42 billion budget. Now even some in Washington are questioning the soundness of pushing homeownership so broadly.
And just so we’re clear on who benefits:
Part of the reason is the structure of government subsidies, which are worth very little to low-income families but quite a bit to families with big incomes. Those well-off families typically do not need government support to buy a home but use it to buy bigger places than they would otherwise purchase.
The mortgage interest deduction alone is worth about $21,000 to a taxpayer in the highest bracket of income with a $1 million mortgage. But for a typical family that bought, say, a $220,000 house with 20 percent down, the break is worth about $1,600.
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