The New York Times has a feature, Big Gifts to G.O.P. Groups Push Donor to New Level, about Bob Perry, a wealthy home builder from Texas, who funded the Swift Boat attacks against Kerry and is a major funder on the right. Perry created Perry Homes, a high-end custom home company out of Houston.
Your gut reaction is probably that the home mortgage interest deduction and other housing subsidies go primarily to lower income people purchasing cheaper homes, people on the margin between owning a home and not owning a home. That’s the exact opposite of what really happens. Research has found that the tax deduction does little to increase home ownership. Other research has found that the tax savings for households earning more than $250,000 is 10 times the tax savings for households earning between $40,000 and $75,000 a year.
You can see how regressive the current system is when you look at this graph from the Urban-Brookings Tax Policy Center document 2005 How to Better Encourage Homeownership, which includes multiple means we subsidize housing:
The businesses who benefit the most from this system are those in the business of building high-end custom single-family detached homes. And the homeowners who benefit the most from this system are, well, probably not you. Keep this in mind as the Deficit Commission might end up doing a good thing and recommend removing highly regressive giveaway of the home mortgage interest deduction.
We’ll get to the influence of the real estate wing of finance and the right-wing conservative movement more in the next post.
Rortybomb 
Mike,
Some of the assumptions in the footnote of the chart appear to skewed to guarantee the graph makes the desired point.
Even if you agree with the assumptions, graphing the line using the incentives as a percentage of household income would appear likely to produce a much less dramatic looking curve – rather more of a declining line/curve, no?
Hey Kevin,
I see what you are saying, but I am not sure if I’d put the y-axis as percent of household income. What I think we want to see is where a marginal dollar goes, and at the margins it mostly goes to the top 3% of society.
If you check out the other links, particularly this one, there are other, perhaps better, ways of pointing out how regressive this is.
From the research, for 25-35 year old homeowners with over $250,000 in income, the mortgage interest tax savings is $7,077. For household under the age of 50 with incomes between 125,000 and 250,000, the average tax savings from the mortgage interest deduction is roughly $3,600.
And richer people are far more likely to claim this deduction – more than 98% of homeowners with income in excess of $125,000 claim itemized deductions, compared with 23% of those making under $40,000. It’s also an incentive to leverage up on housing, which is a major problem, it pushes up prices in places where housing is constrained, and gives a huge incentive to buy larger, single-family detached homes.
It’s one of those things that, the more you look into it and see what it does, the worse it is. It doesn’t even really help in what it is justified in doing (getting the marginal person into a house).
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I’d like to hear you address a statement that I don’t agree with, but that I can hear some people I’ve known making: “Poor people are too stupid / incompetent / irresponsible / etc” to own a house.
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