My question actually was, do you see the mortgage deduction in general, as a perk for the rich? I would certainly agree that the mortgage deduction on a million dollar home is benefiting the rich, and even a 500k home is out of reach for most, but normal people, middle class and lower, in housing well under 200k, do get a benefit from it.
I can certainly see how the rich get a greater benefit out of it, but I certainly would not agree that they are the only ones to.
No, you don’t have to be rich to get a benefit from it. But remember, only something like 35% of taxpayers even itemize in the first place, and if you don’t itemize, you don’t get any benefit. The benefit skews heavily towards the more wealthy tax payers. And the idea that home ownership would be negatively impacted if the benefit were eliminated does not hold up if we look at what happened in countries that did eliminate it.
I played with some google, but have no idea…
35% of taxpayers may be the only ones itemizing, but what percentage of homeowners are? If you are on the first half of your mortgage, just about any homeowner is going to be paying more in interest than the standard deduction.
You did say “The mortgage deduction is, indeed, a perk for the rich”, which is true, but it is also a perk for the middle and lower middle class.
When other countries eliminated it, did they replace it with any other form of subsidy? I ask becuase I don’t know, but I do have to think that just making buying a house less affordable has got to have an effect on home ownership, that’s just how markets work.
There’s a Wikipedia article that I haven’t read all the way through on “Home-ownership in the United States”. Looks like about 2/3rds of occupied housing units are occupied by the owner.
So we have the percent who itemize and the ownership rate. There are some who don’t own who do itemize (I have high local income taxes) but I’m guessing that’s a minority.
The standard deduction for a married couple is $12.7K and the average mortage is ~$1.1/mo, so just about anyone who owns a home isn’t going to benefit. Especially since we know that home ownership is about 65% of the population, that already tells us a whole lot of home owners aren’t itemizing. And if you get to knock $500 off your income in the lowest tax bracket, how much are you saving?
Yes, some people who aren’t well off benefit, but the vast majority of the benefit goes to the well off. There’s just no getting around that just by looking at the parameters. If my original statement was not precise, I apologize and withdraw it.
Be that as it may, I do read cites, and the Federalist article is missing - whether intentionally or not - something very significant. The provision only benefits colleges which decline federal money and which have an endowment of more than $250,000 per student (House version) or $500,000 per student (Senate). Hillsdale is the only college which refuses federal money and has an endowment of more than $250,000.00 per student.
In other words, the Federalist article invites the reader to assume that six other colleges would benefit, because they meet half of the criteria. It doesn’t say whether they meet the other half, and since it doesn’t even mention the other criterion, one must assume that they don’t. The information mentioned in the WaPo article (which is sourced from a Democratic aide) indicates they don’t.
Like Senator Toomey, I’m not totally clear on all the facts, but I googled a few of the six other colleges listed. The Wikipedia articles on them are not consistent, but this is what I found:
It sure seems like RNATB has a good point that the change in the sunset amount for the exemption would not have impacted these colleges.
Once you have covered your standard deduction, then it becomes worthwhile to deduct other things as well. I usually managed to round up another thousand or so in deductions beyond the mortgage deduction. Not worth without the mortgage.
the 65% sounds about right, compared to 35%. Lower income homeowners will not be deducting the interest for the whole life of the loan, just the first decade or so, which is when they can usually use that tax break more. People’s earning potential tends to go up over time, plus the mortgage is a fixed cost (taxes and insurance, obviously, are not), which goes down in real dollars over time.
I’d have to dig up tax records from 15 years ago, but it was saving me a good deal when my mortgage was new.
As I said, now it’s barely worth taking, unless I have a bunch of itemized deductions to take.
I absolutely agree that the majority of the benefit goes to the well off, (as is the case in nearly every tax proposal) that’s why I have little issue with them capping it at a lower rate. I do think that, if there is not some other subsidy put into place to replace it, that entirely removing it (which I am aware is not a proposal at this point) would negatively effect new home buyers.
On the radio yesterday, I heard it called the “Donor Relief Act”
Most “rich” folks I know, don’t have interest on their mortgage because they don’t have one. They are financially able to pay off any home they own.
This paper (PDF) analyses the home mortgage deception and is worth the read. I can’t quote from it (PDF), so I apologize for that. They find that it has, at best, a minimal effect on home ownership but does make the tax code less progressive.
Thanks, but, really quick, did you mean “home mortgage deception” this time, or is it the same autocorrect demon messing with you?
EAT: The paper is from 2003, well before the housing bubble and crisis, I’m still reading it because it probably still has useful info, but do you think that the circumstances it is talking about have changed any in the meantime?
This is all the more true when one considers that the excise tax from which the special targeted exemption was created was itself a specially targeted “stick it to them thar librul aaig-heds!” ideological attack.
I’ve been fighting those demons for a long time!
There’s a guy who recently wrote a book who was interviewed on NPR a few months ago. I can’t for the life of me remember who the guy was. It’s like there’s a deception going on when I try to remember it! 
I don’t know what the endowment size or student bodies of those other colleges are, and would caution against making assumptions about them in the absence of information, but even if the Democratic aide is right that the other six colleges wouldn’t qualify, s/he appears to be wrong about Hillsdale benefiting:
Using the numbers provided by Politico ($528M/1400 students = $377k/student), Toomey’s Senate amendment wouldn’t have even benefited Hillsdale College, as they apparently fall below the Senate version’s $500,000/student limit.
I understood his point to be that Toomey’s amendment only benefited Hillsdale, but it doesn’t appear to do even that. I didn’t think his point had much of anything to do with “the change in the sunset amount for the exemption”, but perhaps I’ve just misunderstood him or you.
So, are there any colleges at all that would benefit from this amendment? Was this another mistake on the republican’s part in their haste to put this together?
But Toomey said he put it in there to benefit Hillsdale and perhaps any other colleges like it.
If people talk about Toomey’s provision as benefiting Hillsdale, but Toomey fucked up the drafting so that he didn’t achieve his goal, it’s a bit rich to accuse the people calling out the earmark as being the ones who are wrong.
And by the way, relating to the Federalist article that accuses Democrats of “lying” about Toomey’s provision, I just found another way in which that article is wrong. That article lists six colleges that could also benefit from the tax earmark. But actually, at least three, and possibly four, wouldn’t be subject to the tax anyway because they have fewer than 500 tuition-paying students.
I wonder if the Federalist will run another article stating something to the effect of: “Dean Clancey Blatantly Lied about Wyoming Catholic College, Patrick Henry College, Gutenburg College, and maybe Christendom College: Every single Federalist contributor owes Senate Democrats an apology for the blatant lies spread about these colleges during Federalist coverage of the Senate debate over tax reform.”
Not that I’m aware of, at least as thing stand today.
I don’t know for certain, but it certainly appears possible. There’s another possibility, but I’m not certain on what the actual sequence of events was: As food for thought, it’s possible that the Senate just raised the limit to $500K/student as another way to protect Hillsdale after the Toomey amendment was defeated.
https://www.chronicle.com/article/The-Brief-LifeUndignified/241973
The Brief Life and Undignified Death of the ‘Hillsdale Carve-Out’
Chronicle of Higher Education
(Emphasis added)
Got a nickel says that the other colleges listed above share that affectionate regard. Just a wild guess.
And finally, this…
Well sure, Senator from Orgeon, probably wants to protect that college where kids go to get a Bachelor’s Degree in Leninist Arts!