Q: How do federal taxes subsidize housing for the wealthy?

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Q: How do federal taxes subsidize housing for the wealthy?

A: Through the mortgage interest deduction! By 2019, it is expected to cost over $96 billion. This public housing program for the wealthy is actually a subsidy of mortgage debt, not a direct housing subsidy (because why not subsidize the real estate and banking industries). It works like this: if you have a mortgage on a home, you can deduct the interest you pay during the year from your income, lowering your "taxable income." The more you borrow, the larger your federal housing subsidy...even for a vacation home! For example, in 2014, of those who deducted mortgage interest, the average annual benefit for those earning $40-50k/year was $168 vs. $4,692 for those earning above $200k (see chart above). If you take the "standard deduction" like two-thirds of Americans, then you receive no benefit at all. As reported in the NY Times, the "average homeowner boasts a net worth ($195,400) that is 36 times that of the average renter ($5,400)" and yet,  "Democratic leaders who represent districts with high housing prices, like...Senator Chuck Schumer (New York), have been outspoken critics of MID reform."

- originally published in the 8/21/2017 newsletter

Stephanie Lee