Why the Mortgage Interest Tax Deduction Has Got to Go

The MID is currently projected to be a $96 billion program by 2019. And as we recapped in that earlier post, nearly all of that spending goes to high-earners with large mortgages.

This staggering inequity is because of how the benefit is designed. You can only claim the deduction if you itemize your expenses, something that only those with higher incomes tend to do. As a result, the value of the benefit actually goes up as your income rises. This means that the MID actually incentives mortgage debt, rather than homeownership -- you get a larger benefit if you have a more expensive mortgage.

As a result of all these policy design choices, someone making millions of dollars a year -- even if they have multiple homes -- gets an average of $1,236 per month from the MID. That could cover most or all of a month’s rent for low-income households, whose average share is just eight cents, if they can get the benefit at all.

For someone with a $1 million mortgage, the MID means that the federal government gives you back about $22,000 a year -- enough to push a family of three above the poverty line.