01 April 2018

The New York Times: “How Homeownership Became the Engine of American Inequality”

Five months ago, before being confirmed as Treasury secretary, Steven Mnuchin announced that the new administration hoped to “cap the mortgage interest”. But when Trump released his tax plan last month, the MID was untouched. Trump did propose to double the standard deduction (to $24,000 from $12,600 for married couples, for example) which would make the MID irrelevant for a vast majority of homeowners, whose mortgage interest would be less than the increased exemption, giving them almost no reason to itemize. But wealthy families living in expensive homes would still cash in. If anything, doubling the standard deduction simply exposes the MID for what it really is: a generous public-housing program for the rich. Diane Yentel, the president and chief executive of the National Low Income Housing Coalition, believes that in the long run this will make the MID “untenable to retain”.

Yentel’s coalition supports the idea of lowering the size of deductible mortgage debt to $500,000 and reallocating the savings to housing assistance for low-income families. “The solution is so obvious”, Yentel says. “There are a number of programs that have proven success in ending homelessness and ending housing insecurity.” The problem is not in the policies’ prescriptions but in their dosage: We severely underfund programs that work. By one estimate, capping the MID at $500,000 would save $87 billion over 10 years, even though less than 6 percent of mortgages nationwide exceed half a million dollars. That savings would allow 1.2 million additional families to benefit from housing vouchers.

Matthew Desmond

Another weird provision in the US tax code that fuels income inequality – and another way for the rich to solidify their wealth and power. Reminds me of the research of Thomas Piketty and my own thoughts on the matter; sadly little has changed since, and, under the Trump administration, it’s unlikely to change in the short term.

Ohene Asare and Régine Jean-Charles homeowners in Milton, Mass.
Ohene Asare and Régine Jean-Charles are homeowners in Milton, Mass. They live with their four children and an au pair. Damon Casarez for The New York Times

We tend to speak about the poor as if they didn’t live in the same society, as if our gains and their losses weren’t intertwined. Conservatives explain poverty by pointing to “individual factors,” like bad decisions or the rise of single-parent families; liberals refer to “structural causes,” like the decline of manufacturing or the historical legacies of racial discrimination. Usually pitted against each other, each perspective serves a similar function: letting us off the hook by asserting that there is a deep-rooted, troubling problem — more than one in six Americans does not make enough to afford basic necessities — that most of us bear no responsibility for.

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