Study: Upper Class Entitlement Helps Upper Class Most

The Wall Street Journal has a
write-up of a new study by the R Street Institute that looks at
how the mortgage-interest deduction is taken zip code by zip code.
Conclusion?

tax preferences, particularly the mortgage-interest deduction,
have helped drive up the size of houses by as much as 18% in the
nation’s most affluent areas while not broadly encouraging people
to buy homes. […]

the government’s tax subsidies for housing “don’t encourage
homeownership in any meaningful way. People just end up buying
larger homes,” said Andrew Hanson, an associate professor of
economics at Marquette University who conducted the study along
with two other economists.

Reason’s Anthony Randazzo and Dean Stansel were on this story 28
months ago, in a piece titled “The
Upper-Class Entitlement: It’s time to end the mortgage interest
deduction.” From that:

This longstanding incentive, which allows individual taxpayers
to deduct up to $1.1 million in home loan–related interest payments
from their taxable income, has warped the real estate market and
overwhelmingly benefited higher-income Americans, all while failing
to achieve its stated policy objection of promoting homeownership.
[…]

If [the] $1.2 trillion in itemized deductions was instead spread
throughout the tax base, the average tax rate could be reduced by
roughly a fifth, from 17.8 percent of taxable income to 14.5
percent. Such a tax cut would directly increase the reward for
productive, income-generating activity. Closing loopholes such as
the mortgage interest deduction while lowering overall rates would
lead to a more productive economy.

Link via the Twitter feed of Neil
King.