Thursday, January 5, 2012

Estimated Direct Annual Federal and State Home Ownership Tax Expenditures in Oregon: $2.39 Billion, $3,500 Average per Mortgage.

I have prepared a table HERE that shows my estimate of $2.39 Billion in annual Federal and State direct tax expenditures in Oregon for home ownership.  

Included are three types of tax expenditures: 
  1. Mortgage Interest
  2. Property Taxes 
  3. Avoidance of Capital Gains Tax on Sale of Principal Residences
Note: These DIRECT expenditures do NOT include a fourth indirect tax expenditure--an additional $2.97 Billion total Oregon cost that would result from an "imputed rent for homeowners" calculation [see note 3 below under Sources and Methods for more detail].   (Imputed rent is the amount of income homeowners could earn if they chose to rent their home instead of live in it). If those costs were included the total annual Oregon home ownership tax expenditures would increase to $5.363 Billion.

Some Observations: 
  1. Federal tax expenditures for these three items account for $1.289 Billion or 54% of the total direct Federal/State home ownership tax expenditures. 
  2. Oregon tax expenditures for these three items account for $1.104 Billion or 46% of the total direct Federal/State home ownership tax expenditures.
  3. The combined Federal/State tax expenditure for the mortgage interest deduction alone adds up to $1.615 Billion annually or 67% of total direct Federal/State home ownership tax expenditures. 
  4. Dividing these tax expenditures by the ACS 5 year estimated number of owner occupied mortgages results in an estimate that the ANNUAL average tax expenditure per Oregon owner occupied mortgage is $3,564. ($1,920 federal/ $1,645 state).
  5. Not shown in table: IF the indirect "imputed rent for homeowners" costs were included, then average ANNUAL average Oregon tax expenditure per mortgage would increase to $7,987 ($4,868 Federal/$3,119 State) 

  1. For Oregon state tax expenditures I used the 2011-2013 Tax Expenditure Report HERE.
  2. For Oregon's share of Federal tax expenditures I used 1% of the Federal tax expenditure estimates referenced in the Pew Charitable Trusts report, Cost and Benefits of Housing Tax Subsidies, found HERE.  Executive summary of this report is HERE.  [Estimate is conservative; 1% is below Oregon's share of national population].
  3. For the indirect cost estimate for imputed rent I took 1/2 of 1% of the national total in the PEW report as the Oregon state tax expenditure ($990 million). Adding that to 1% of the national total federal tax expenditure ($198 Billion x 1% = $1.98 billion) produced a total Oregon federal and state tax expenditure estimate of $2.97 billion. 
  4. Estimate of Oregon owner occupied home owners with a mortgage is from American Community Survey 5 year 2006-2010 table HERE

Originally created and posted on the Oregon Housing Blog.

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