The Stark Geographic Inequality of the Home Mortgage Interest Deduction

The home mortgage interest deduction is America’s largest housing program. It costs the federal government (in lost tax revenue) more than Washington spends on the entire Department of Housing and Urban Development, more than it spends on veterans benefits and education. The subsidy is simply massive. And it has long been treated as untouchable because, in theory, so many middle-class Americans get their own little piece of that pie.

In reality, the bulk of the benefit goes to high-income households. The more money you have, and the higher the value of your home, the more this subsidy helps you. This chart, from a report last year by the Reason Foundation, estimates the average annual tax savings from the mortgage interest deduction, by income, in 2008.