Monday, January 30, 2012

Housing Welfare for Middle Class Americans

Why exactly should renters in the U.S. be subsidizing homeowners? To the tune of $140 billion per year. This is, by the way, far less than half what is spent on food stamps in a year ($65 billion in 2010). All the subsidy does it drive up the price of housing, which makes it even harder for those renters (who on average have lower income) wanting to own, to actually do so. Especially since the real sweet benefits are reaped at the top of the middle class pile, not at the margin.

Anyone complaining about the "welfare state" in America, needs to look at their tax return and see whether they aren't a worse offender.

Despite Benefit Disparities, Middle Class Supports Mortgage Deduction

Tax Expenditure of the Week: The Mortgage Interest Deduction
The mortgage interest deduction helps millions of middle-class homeowners.[3] But it helps wealthy families much more.

If the purpose of the deduction is to encourage homeownership, one way to gauge its effectiveness is to see how well it targets the so-called marginal homebuyer, for whom a tax subsidy could mean the difference between being able or unable to afford a home purchase.

It turns out the mortgage interest deduction is poorly targeted according to this criterion. Households with incomes between $40,000 and $75,000 receive, on average, $523 from the mortgage interest deduction. Households with incomes above $250,000 receive $5,459, or more than 10 times as much.[4]

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