Saturday, October 27, 2012
New York Times: Who Really Benefits From Interest Deductions:
Real estate and building industry groups have loudly condemned proposals by both presidential campaigns to shrink the mortgage interest deduction. Central to their arguments is the long-hallowed deduction’s value to the middle class. But a closer look at who benefits suggests that this perception, though prevalent, is not accurate.
To begin with, most taxpayers do not benefit from the deduction at all. This is because they do not itemize deductions on their federal income tax returns. According to Joseph Rosenberg, a research associate at the Urban-Brookings Tax Policy Center, only about 30% of taxpayers itemize, rather than take the standard deduction. And the majority of these itemizers are upper-middle and upper-income households.
Within that privileged category, the 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. ...
That the deduction has been politically sacrosanct for so long reflects just how much it is prized by the itemizers of the moment, as well as those who are in the business of selling homes.
(Hat Tip: Mike Talbert.)