W State Details--In 2014 Federal Income Tax Filers w Incomes $1M+ Got $1.38 Billion in Mortgage Interest Subsidies, $500 Per Month, $6,000 Per Year

Using 2014 IRS SOI data I constructed a PDF file HERE and embedded below which provides my state and US level estimates of the housing subsidies that filers with AGI of $1 million or more received as a result of mortgage interest deductions. 

Observations: 
Nationally

1. 229,000 filers with AGI of $1 million or more reported mortgage interest payments of more than $5 billion. 
2. Filers in this income category had an average tax rate of 27%.
3. Applying that tax rate to the amount of reported mortgage interest results in my calculation that these filers got a combined $1.38 BILLION in housing subsidies from the deduction of mortgage interest. 
4. That combined $1.38 billion in mortgage interest deductions works out to $503 per month, $6,031 in housing subsidies. 
5. This calculation does NOT include the value of property tax income reductions (stay tuned). 

In Oregon

1. 1,770 filers with AGI of $1 million or more reported mortgage interest payments of $34.2 million. 
2. Filers in this income category had an average tax rate of 26%.
3. Applying that tax rate to the amount of reported mortgage interest results in my calculation that these filers got a combined $8.8 million in housing subsidies from the deduction of mortgage interest. 
4. That combined $8.8 million in mortgage interest deductions works out to $417 per month, $4,998 annually in housing subsidies. 

Originally created and posted on the Oregon Housing Blog. 

Federal Tax Expenditures for Housing Total $1.6 Trillion from 2014-2018, Annual Mortgage Interest Deduction Costs Projected to Grow by $55 Billion.

The 2014 Budget includes a tax expenditure worksheet HERE. 

I pulled out housing related tax expenditures (broken out for corporations and individuals) and did some calculations in a 3 page legal sized worksheet on my SkyDrive HERE and embedded below. 

My worksheet starts with graph comparing growth in mortgage interest and LIHTC costs from 2012-2018, a table with all housing related tax expenditure costs begins in row 24; note that $$ in table are in millions so add 6 zeroes to a $100,000 entry =$100 billion.


Some observations:

1. Total housing tax expenditures for 5 years 2014-2018 are estimated at $1.6 Trillion, a growth of $106 billion annually/ 38%.
2. Mortgage interest tax expenditures are expected to grow by $55 billion annually from 2014-2018, reaching nearly $157 billion annually in 2018, a growth of 55%.
3. LIHTC expenditures are expected to grow by 9%/$770 million during the same period, reaching $9 billion annually in 2018.
4. Not included in tables, HUD's annual rental assistance cost is projected at $37.4 billion in the 2014 budget. (Except for LIHTC and SF and MF bonds, housing tax expenditures are not income targeted while HUD rental assistance is highly income targeted).

Originally created and posted on the Oregon Housing Blog.

Graphic in Big O Story on Tax Breaks Omits MID and Property Tax Use by Highest Income Filers.

Last week the Big O published a story about efforts to pare state tax breaks. I appreciated the story, including a narrative discussion about the savings that would occur if the mortgage interest deduction was scaled back. 

However, the story contained a graphic showing tax breaks that primarily benefited the highest income bracket and neither the costs of MID or property tax deductions were included.  

I dug out data from the Oregon Tax Expenditure report and found out that the combined cost of the MID and property tax deductions :

1. Was 4X the combined cost of all other deductions included in the graphic.
2. Went disproportionately (61%) to the top 20% of Oregon tax full time filers. 

My Excel calculations, using 2009 data for MID and property taxes, and 2010 data from the Oregonian table, are HERE and in the embed below:  




While I think the cost multiple of 4 X is likely reduced closer to 3 X if 2010 estimates of MID and property tax costs were used, I consider the absence of the MID and property tax cost to be a serious omission from an otherwise good Big O story.  

I have communicated my concerns to the reporter with a suggested update to include the information that I provided and to 2010 MID and property tax data.

If I were big on conspiratorial theory (I'm not), I might think the absence of the MID and property tax from the graphic was linked to an Oregonian editorial after the story was published that called for no change in the MID. 

Originally created and posted on the Oregon Housing Blog.

Two New Tax Expenditure Reports Include Evaluation Framework and Federal Home Ownership /Rental Comparison.

GAO report HERE proposes background and framework for evaluating tax expenditures.

Novogradac Journal of Tax Credits article HERE provides data supporting view that gap between FEDERAL home ownership and rental housing tax subsidies has narrowed.  

While narrowed somewhat by a decrease in the national home ownership rate, the federal gap remains large: 5 year expenditures are $972.2 billion for home ownership, $47 billion for rental housing. (Oregon rental/ home ownership gap remains even larger as indicated by my recent post HERE).

Originally created and posted on the Oregon Housing Blog.

2013-2015 State of Oregon Tax Expenditures: Home Ownership Gets 95% of Housing Related Tax Expenditures.

The new 2013-2015 State of Oregon Tax Expenditure reports are out HERE, showing a breakout of $36 billion in planned tax expenditures, an increase of $3 billion from the last biennium. 

As is the case every other two years I have prepared a summary of housing related tax expenditures and created an Excel workbook HERE and embedded below. It also includes ALL tax expenditures and a pivot table.

Observations: 

1. State tax expenditures for home ownership are expected to increase by $214.5 million, to $2.087 BILLION.
2. State tax expenditures for rental housing are expected to remain the same at $119.6 million.
3. Expenditures for home ownership represent 95% of total housing related tax expenditures for the state of Oregon, with the rental housing share at 5%.

Originally created and posted on the Oregon Housing Blog.