A new analysis of zip code level tax and demographic data conducted by researchers at the Tax Policy Center shows that most tax payers who claim and therefore benefit from the mortgage interest deduction (MID) live in zip codes that are disproportionately white, middle-aged, and married. Over one third (36.9%) of all tax returns that claim the MID are from zip codes in the top decile by adjusted gross income.
The authors, Benjamin H. Harris and Lucie Parker, attribute the regressivity of the MID to three factors. The first is that the MID is only useful to those taxpayers whose itemized deductions are worth more than the standard deduction, which includes those with large mortgages. Second, the higher one’s tax bracket, the more tax deductions are worth. Finally, the higher one’s income, the higher the MID, as a share of income, will be above the standard deduction.
The United for Homes Campaign, led by NLIHC, is seeking changes to the MID to make it fairer, flatter, and more valuable to lower income homeowners, and to raise significant new revenue to fund the National Housing Trust Fund.
To read The Mortgage Interest Deduction Across Zip Codes, go to http://www.brookings.edu/research/papers/2014/12/mortgage-interest-deductions-across-zip-codes-harris.
To learn more about and to endorse the United for Homes Campaign, go to http://nlihc.org/unitedforhomes.