A study by Brian McCabe, “Costly, Regressive, and Ineffective: How Sensitive Is Public Support for the Mortgage Interest Deduction in the United States,” published in Housing Policy Debate finds public support for the mortgage interest deduction (MID) declines when people learn about the MID’s high cost, inequitable distribution of benefits, and ineffectiveness in expanding homeownership. Renters were more sensitive to these facts than homeowners. Democrats were most heavily influenced by the MID’s inequitable benefits and ineffectiveness, whereas Republicans were most heavily influenced by the MID’s cost and ineffectiveness.
The MID, a federal tax policy that allows homeowners to deduct their mortgage interest payments from their taxable income, enjoys widespread popularity. But the MID overwhelmingly benefits wealthy households (75% of the benefits go to the wealthiest 20% of households by income). The deduction is also one of the costliest expenditures in the tax code (nearly $70 billion prior to tax reform) and is ineffective in helping low or moderate income households become homeowners.
Through an online survey, McCabe asked some respondents a neutral question about their support for the MID, while he asked other respondents a similar question about their support for MID that framed the question about their support with information about one of the critiques. Respondents were also asked questions about their political affiliation and homeownership/rental status.
Overall, 82.6% of respondents supported the MID when the question was framed neutrally. But support fell for the MID to 70%, 66.7%, and 62.6% when information was given to respondents about the MID’s cost, inequity, or ineffectiveness, respectively. Each respondent was given no more than one critique.
Among Democrats, support for the deduction fell nearly 20 percentage points when the question of support was framed around the issue of inequality. Among Republicans, support fell by 17 percentage points when the question was framed around cost. The largest decline in support for respondents from both parties was when the question was framed around ineffectiveness.
% Support for Mortgage Interest Deduction
% MID support with neutral question
% MID support framed with inequality
% MID support framed with cost
% MID support framed with ineffectiveness
Source: Brian J. McCabe (2018): Costly, Regressive, and Ineffective: How Sensitive Is Public Support for the
Mortgage Interest Deduction in the United States?, Housing Policy Debate
These results suggest that awareness about the MID’s shortcomings is likely to decrease its popularity, and educating the public may bolster MID reform efforts. This study was conducted prior to the 2017 tax law (Memo, 12/18/2017), which will significantly reduce the costs of MID but make it more regressive, benefiting only the wealthiest homeowners.
“Costly, Regressive, and Ineffective: How Sensitive Is Public Support for the Mortgage Interest Deduction in the United States” is available at: https://bit.ly/2CEmwtU