Reason...
Study:
Time to Eliminate the Mortgage
Interest Deduction
Removing homeowner subsidies would
allow everyone’s income tax rates to be lowered
July 28, 2011
The
mortgage interest deduction does
not increase homeownership rates and amounts to little more than a
subsidy for
wealthy homeowners, according to a new Reason Foundation study that
recommends
eliminating the deduction and streamlining the tax code. The Reason
Foundation
report suggests a revenue-neutral solution: eliminate the mortgage
interest
deduction and lower federal income tax rates for all Americans by 8
percent.
“The
mortgage interest deduction
subsidizes and rewards wealthy people for buying expensive houses they
would’ve
purchased anyway,” said Anthony Randazzo, director of economic research
at
Reason Foundation and co-author of the report. “The deduction is used
almost
exclusively by people in the top income brackets with large mortgages.
Renters,
along with lower- and middle-class families, are getting a raw deal.
Taxpayers
and the economy would be best served by ditching the mortgage deduction
and
lowering overall tax rates.”
The
mortgage interest deduction was
used on about a quarter of all tax returns filed in 2009. But the
Reason
Foundation report shows the home mortgage deduction was used on 73
percent of
tax returns filed by those with incomes over $200,000 that year. The
average
tax savings for those homeowners: $2,221. In contrast, just 5.5 percent
of tax
returns filed by those making $20,000 to $30,000 used the mortgage
interest
deduction in 2009, with no significant tax savings. Thirteen percent of
tax
filers making between $30,000 and $40,000 used the mortgage deduction.
Their
tax savings was a paltry $96. And 23 percent of tax returns with
incomes
between $40,000 and $50,000 used the mortgage interest deduction, with
an
average tax savings of just $114.
The
study finds that the mortgage
interest deduction has not increased homeownership rates and that
eliminating
it would not reduce homeownership figures or hurt housing prices.
The
full report is online here: Reason Foundation
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Foundation is a nonprofit think tank
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produces
respected public policy research on a variety of issues and publishes
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please visit www.reason.org.
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