And let's be clear, we are talking mainly about the upper, upper middle class. Here's the breakdown on where those mortgage interest savings are going:
Yes, yes, I know: $200,000 may not feel like all that much money in Boston or New York or San Francisco. But come on: The median household income in the U.S. in 2015 was $56,515. The cutoff for the top quintile was $112,262; for the top 5 percent, it was $214,462. The true middle class isn't benefiting much from these tax breaks.
Now, as a recipient of multiple upper-middle-class entitlements, I will admit that I do not voluntarily return the money I save to the government, and would not be thrilled if these tax breaks were suddenly removed. I also have some understanding for those who object to calling them “subsidies” or “entitlements” (I’ve heard from these people before). The taxpayers who benefit the most from these breaks are still generally paying lots of money to the Internal Revenue Service, and the federal income tax in the U.S. remains quite progressive -- at least until you get up into the rarefied income levels where people can avail themselves of tax shelters much fancier than mortgages and 401(k)s.
But it seems pretty clear that, if these tax breaks had never become law, no one would really miss them. Houses might cost a bit less. College might be slightly cheaper. Income tax rates might be a little lower. The economy might run a little bit more smoothly. So ... how do we get to that place from here?
This article was provided by Bloomberg News.
1. There are also economists who think it stimulates tax avoidance more than it stimulates growth.
2. A far more effective way to build retirement savings, the authors found, is through higher employer contributions to retirement plans.
