Senator Smith’s Mortgage Insurance Deduction Benefit Numbers Are WRONG.

A December 2007 press release from Oregon Senator Gordon Smith HERE about the extension of the mortgage insurance tax deduction claimed that “Over 12 million American homeowners benefited from this deduction in the first year alone.”.

The Congressional Budget Office in another December 2007 cost estimate HERE said that the cost of mortgage insurance deduction during all of FY 2009 will be $109 million. (estimated costs over 10 years were $570 million).

Dividing CBO’s cost estimate of $109 million in FY 2009 by Senator Smiths assertion that 12 million households benefitted in the first year results in the calculation that the average ANNUAL revenue loss would be $9.08 per household. ($109,000,000/12,000,000=$9.08).

Conclusion: The calculated home ownership tax benefit per household of a little more than $9 per year clearly cannot be accurate. Instead, I seriously doubt that there were 12,000,000 ACTUAL beneficiaries of the mortgage insurance deduction in the first year as claimed by Senator Smith. Instead at best, I expect that there MAY be 12,000,000 POTENTIAL beneficiaries who had incomes below the phase out threshold AND who owned a home AND who had mortgage insurance on their homes. (This potential beneficiary base however ignores the fact that many homeowners do NOT itemize their deductions and therefore could not claim this deduction).

Note : If the ACTUAL annual number of beneficiaries were only 1/10 of the Smith 12 million assertion (1,200,000 households) the net benefit per household would still be less than $91 annually, an amount insufficient to convert many (if any) renters into homeowners.