From: sawicky at epinet.org (Max Sawicky) To: <lbo-talk at lists.panix.com> Subject: RE: mortgages Date: Fri, 28 May 1999 12:49:09 -0400 Message-ID: <001101bea92a$018d2360$3bf246d1 at epi59.epinet.org>
>
> Filers only benefit from the mortgage exemption if the
interest
they are paying plus any other deductions other than the personal
ones is greater than $7,500, right? I have a very hard time
seeing how that would be the case for families with AGIs under
50K. >>
god I love the smell of tax statistics in the morning.
Here's some figures on average deductions per return by AGI group in 1996. I've included total deductions, and broken out those for mortgage interest. The number of returns refers to all who itemize, out of a grand total of over 120 million. For real nerds, the source table is attached as an Excel file. The data do report the types and levels of deductions by AGI/income group. They do not show average exemptions by income group in this table. You can get exemptions and standard deduction by income class for all returns. For instance, for AGI from $30K to $40K, the exemption value averages $5,686.
About 29 million (not shown) take a mortgage interest deduction, so most of those who itemize (35Million) are deducting mortgage interest. Since itemizers include most higher-income persons in the country prior to retirement (when income drops), this suggests that people typically do not take great pains to minimize their mortgage debt -- they have better things to do with their potential home equity, not excluding consumption.
You can see that the total itemized deductions are more than $7,500 for all groups, but not too much more for most itemizers. So we could acknowledge that even "on the margin" of fungible deductions, the mortgage interest deduction in and of itself is worth a good bit less than its face value, relative to the standard deduction. For returns below $75K, moreover, the average mortgage interest deduction is less than $7,500.
Note that this has two somewhat contradictory implications. Relative to itemizers, this means the deduction is more regressive, since taking a $7,500 slice out of every income group's average renders the resulting distribution of all deductions or just the mortgatge interest one more lop-sided at the top. Relative to the rest of the population in a static sense (ignoring those who have already paid off a mortgage or those who will), it means most itemizers with respect to the mortgage interest deduction per se are less advantaged relative to non-itemizers. Again, it is only the very highest income class that makes out big, relative to the vast majority of the population. Note the few total returns of $100K and up, relative to the 120 million filers (e.g., returns), and the usually lower-income non-filers.
This resembles the capital gains preferences; while they affect a many people (e.g., about 25 million returns), the bulk of tax savings are very skewed within the group. In both cases you have policies which gull a great many people but mostly benefit a much smaller number.
On the whole, vis-a-vis Enrique vs. Jordan, it looks like Enrique is more right than wrong, though I maintain my previously stated quibbles re: Enrique.
Average
Itemized
Average Deduction, Size of adjusted Itemized Mortgage Number of gross income Deduction Interest returns
All itemizing returns 16,167 7,481 35,414,589 Under $5,000 10,799 5,930 204,305 $5,000 under $10,000 9,453 4,713 495,708 $10,000 under $15,000 9,925 5,272 889,415 $15,000 under $20,000 10,455 5,461 1,245,013 $20,000 under $25,000 9,841 5,485 1,545,702 $25,000 under $30,000 10,337 5,398 1,842,743 $30,000 under $35,000 10,076 5,459 2,025,269 $35,000 under $40,000 10,936 5,782 2,249,716 $40,000 under $45,000 11,503 6,029 2,227,043 $45,000 under $50,000 11,732 6,155 2,339,075 $50,000 under $55,000 12,328 6,332 2,174,658 $55,000 under $60,000 12,979 6,504 2,212,145 $60,000 under $75,000 14,015 6,843 5,406,103 $75,000 under $100,000 17,197 8,191 4,903,217 $100,000 under $200,000 23,568 11,061 4,235,193 $200,000 under $500,000 42,387 17,308 1,123,077 $500,000 under $1,000,000 82,000 24,079 194,077 $1,000,000 or more 318,591 32,510 102,129 Taxable returns 16,132 7,463 33,329,940 Nontaxable returns 16,723 7,802 2,084,649
mbs