Economists and tax wonks almost universally share the view that benefits from the tax deduction on home mortgage interest flow mostly to the well-off, and do little for the economy at large. It’s one of those rare things that the right-leaning American Enterprise Institute, the sort-of-right-leaning Tax Foundation, the left-leaning Center on Budget and Policy Priorities and the centrist (or sort-of-left-leaning) Urban-Brookings Tax Policy Center all can agree on.
I did find a guy at Heritage Foundation, which leans quite far to the right, who defends the deduction, but he does so on the principle that all interest payments should be tax deductible (because those charging the interest are paying taxes on their profits), not on the basis of any empirical evidence.
So I was a little surprised when several readers took issue with my characterization of the mortgage deduction in my column Wednesday as a “subsidy for the affluent.” There was the funny fellow who requested, “Please do your research before posting such clearly socialist comments,” but also serious-sounding commenters and e-mailers who seemed to think that, in part because the interest deduction isn’t granted for mortgage amounts above $1 million, it isn’t chiefly benefiting the affluent.
The numbers on who takes advantage of the mortgage interest deduction are straightforward: According to the Joint Committee on Taxation of the U.S. Congress, which is run by Republicans these days and thus presumably isn’t socialist, 82% of the $72 billion in tax savings from the mortgage interest deduction in 2014 flowed to taxpayers earning more than $100,000 a year, with 42% going to those with incomes of $200,000 or more.