Upside Down: The $211 Billion Budget to House the Wealthiest Homeowners
In the previous post, I announced the release of Prosperity Now's newest paper in the Upside Down series: Upside Down: Homeownership Tax Programs. I also described the incredible size of this spending--$211 billion in 2013 alone. For this post, I'll dive into who gets the support from these programs.
This brings us to the meaning of "Upside Down." In short, it means that the more help you need, the less support you get. For homeownership tax programs, it means that the higher your income, the more the government spends to help house you.
There is a huge gap in support between those at the top and those at the bottom. Looking at two of the largest homeownership tax programs, the folks in the very top 0.1% received an average benefit of over $17,000 in 2013. Those in the bottom 20% received an average benefit of three bucks. The top 5% receive more from these two programs than the entire bottom 80% combined.
But it's not just the top versus the bottom. Every single income group receives less support from these programs than the higher-income group above it. Specifically:
The Top 1% receives $7,200 less than the Top 0.1%.
- The Top Quintile receives $6,711 less than the Top 1%.
- The 4th Quintile receives $2,546 less than Top Quintile.
- The 3rd Quintile receives $559 less than the 4th Quintile.
- The 2nd Quintile receives $216 less than the 3rd Quintile.
- The Bottom Quintile receives $41 less than the 2nd Quintile.
Our analysis of IRS data shows that the Real Estate Tax Deduction is particularly lopsided in favor of the wealthy. Taxpayers with incomes over $10 million deducted an average of over $75,000 through this program. In essence, the program is government spending to directly subsidize country manors and Park Avenue penthouses.
Shorter version: the federal government spends an enormous amount on homeownership tax programs, and these programs focus benefits the highest-income holds while doing little to nothing for most low- and moderate-income families.
This is, in a word, crazypants. Or if you prefer a word found in a real dictionary: outrageous, inequitable, infuriating, unjust, and unjustifiable. Hundreds of billions of dollars in federal spending every year. Four times more than what the federal government spends to house low-income families. Almost all going to the wealthiest households. Little to nothing for most working families. Yes, crazypants is the right word.
In the exciting conclusion to this blog post series next week, I'll explain why these homeownership tax programs are so Upside Down, and I'll touch on a few reforms that would reform them. But no need to wait--the full paper with policy recommendations is available now for your reading pleasure.