Why Everyone Loves the Mortgage Interest Deduction

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Over at FiveThirtyEight, Bryan McCabe takes on the mortgage interest deduction:

Commentators often talk about the mortgage interest deduction as a prized middle-class benefit that enables households to achieve the American dream of homeownership. But despite their strong support for the deduction, middle-class Americans are not the primary beneficiaries of this federal tax subsidy. Instead, wealthy Americans take home a disproportionate share of the deduction’s benefits.

….It’s not surprising that the wealthy benefit disproportionately from the mortgage interest deduction….What is surprising, however, is that Americans continue to support a housing subsidy that distributes benefits so disproportionately.

I think this is a lot less mysterious than McCabe makes it out to be. It’s true that high-income taxpayers get a bigger absolute benefit from the mortgage interest deduction than low-income taxpayers. Of course they do: they have bigger mortgages. But I’ve added a column to the JCT report that produced the numbers McCabe uses in his post. The extra column shows roughly how big the mortgage interest deduction is as a percentage of income at various levels:

As you can see, it comes to about 2% of income for everyone. (I used the midpoint of each income group for the calculation. The top income group is blank because “average” income is a little tricky to compute for this group.) What’s more, although homeownership rates are obviously higher at higher income levels, the homeownership rate is 60% even at incomes as low as $25,000.

So why is the mortgage interest deduction so popular? Because homeownership is pretty widespread even at low incomes and the amount of the deduction is about the same for everyone as a percentage of income. $283 may not seem like much, but to someone with an income of $10-20,000, it’s as valuable as $2,856 is to someone with an income of $100-200,000. Result: everyone loves the mortgage interest deduction.

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SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

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