Wednesday, October 20, 2010

The Mortgage Interest Deduction is not Progressive

Last week I argued Russ Feingold's defense of the mortgage interest deduction (MID) didn't square with his reputation for being progressive. Worse was the fact that he could bolster this reputation by advocating to end the Bush tax cuts on the highest income earners even while he argued for the mortgage interest deduction, which disproportionately helps the wealthy.

Dean, for one, wasn't buying it. Here is what he said in the comments:
Increasing the marginal tax rate is clearly more progressive. I seems
to me that you are basically saying Feingold is not progressive enough. Who are you trying to snow?
That's not basically what I am saying, Dean. That is exactly what I am saying. No snow about it. But don't take my word for it. Here's the Tax Policy Center (which is a joint venture of Brookings and The Urban Institute) pdf:
The MID disproportionately benefits taxpayers in the top fifth of the income distribution (Toder, Harris, and Lim 2009). Those who do not itemize deductions on their tax returns receive no benefit and the subsidy rate is larger for individuals in higher marginal tax rate brackets. Because most who benefit would own homes without the deduction, it mostly provides an incentive to live in more expensive homes, not to own instead of rent.
I'm not hopeful for a renewal in America if neither our citizens nor our legislators are able to acknowledge the practical results of this country's policies. It's one thing for the average citizen to be unaware of this state of affairs. For a US Senator who claims to be a progressive, not realizing this seems more like malpractice.

1 comment:

Dad29 said...


If Feinie does NOT vote for an AMT "fix" before 12/31, he will have demonstrated his 'progressive' tendencies very well, indeed.

Because the AMT calculation does not allow as deductions the MID, nor children, nor State/local taxes paid.

Let's see how "progressive" he really is.