from an expert in the field:
Anthony Randazzo is director of economic research at the
Reason Foundation and co-author of the study Unmasking the
Mortgage Interest Deduction: Who Benefits and By How Much?
OCTOBER DEBATE RESULTS:
Should paid sick leave
PUBLIC SUPPORT FOR THE mortgage interest deduction (MID) is
anchored on the ill-informed belief that without it middle-class families
would be relegated to renting, causing homeownership rates to tumble
and housing prices to further fall. But in reality, MID benefits increase
the average homebuyer’s ability to purchase a mortgage by only a minus-
cule 1 percent. The MID was used by 35 million Americans in 2009. That represents just 25
percent of taxpayers, meaning most families do not actually benefit from the MID.
Twenty years ago 48 percent of those getting MID benefits were in the middle class, but in
2009 it was down to just 30 percent. Meanwhile, households with incomes of more than
The deduction provides few or no benefits to low-income families, seniors and Americans
without mortgages. Additionally, the MID costs the government about $100 billion a year in
A revenue-neutral elimination of the mortgage interest deduction could lower everyone’s
taxes by 8 percent without adding a dime to the deficit. And the lost benefits would not be
very much for those few middle-class families that do claim the MID. In 2009, the average tax
savings the MID provided for households with incomes between $40,000 and $75,000
amounted to just $152 a year. That’s $12.66 a month. That is well worth trading for an 8 percent tax cut to everyone (or some other revenue-neutral tax-cut distribution).
For most middle-class families there is not enough benefit from the MID to be the deciding factor in home affordability, and the MID just encourages wealthier families who would
own a home regardless of the tax break to get a bigger house with bigger interest payments for
a bigger tax break.
So if the mortgage interest deduction tax savings are mostly for young, high-income
households, and the benefits don’t even cover an inflated housing price that requires a larger
mortgage than would have been necessary, why do we still have it? C
Percentage reflects votes
SEPTEMBER DEBATE RESULTS:
received by October 17, 2011.
Ten years after 9/11,
is America safer?
YES: 26% NO: 74%
from an expert in the field:
Percentage reflects votes received by
September 30, 2011. Results may reflect
Debate being picked up by blogs.
Ron Phipps is the president of the National Association of Realtors
THE MORTGAGE INTEREST DEDUCTION (MID) is vital to the
stability of the American housing market and economy. The MID makes
a real difference to hardworking American families who are trying to
build their future through homeownership.
For people who don’t have hundreds of thousands of dollars in sav-
ings to buy a home outright, tax benefits such as the MID help them by
reducing the carrying costs of owning a home. For example, a family
who bought a home with a $200,000, 30-year, fixed-rate mortgage in 2010, assuming an inter-
est rate of 5 percent, could save nearly $3,500 in federal taxes when they file next year. That’s
real money they can use to pay down other debts, save for their children’s college education or
put away for retirement.
Proposals to eliminate the MID shouldn’t be thought of as simply getting rid of a tax break
for homeowners, but rather as a de facto tax increase on the middle class and responsible
homeowners, who are already doing their share by paying 80 to 90 percent of the federal
income tax in this country.
It’s a common misconception that only the wealthy benefit from the MID, when in reality
it benefits primarily middle- and lower-income families. In fact, 65 percent of families who
claim the MID earn less than $100,000 per year; as a percentage of income, the biggest MID
beneficiaries are younger middle-class families.
It’s also ridiculous to say that the MID is suddenly part of the deficit problem, when the
deduction has been part of the federal tax code since 1913, for nearly 100 years.
One thing that is indisputable is that eliminating the MID will make it harder for American
families to become homeowners, effectively lowering the U.S. homeownership rate. While not
everyone wants to own a home, and homeownership isn’t for everyone, encouraging and supporting the aspirations of those who are financially qualified, have demonstrated fiscal responsibility and are willing to purchase a home that is well within their means, through tax benefits
like the MID, can generate immeasurable benefits for individuals and families, communities
and our nation’s economy. C
Opinions expressed are those of the
individuals or organizations represented and
are presented to foster discussion.
Costco and The Costco Connection take no
position on any Debate topic.