But evidence has shown time and again that the wealthier among us seem to get the best of federal benefits, whether that be income from low-tax capital gains or deductions on luxuries few others can afford. The latest evidence comes from listings site Apartment List, which looked at mortgage interest deduction (MID) — tax breaks for homeowners — and compared them to rental subsidies for the poor known as Section 8.
The report shows that high-income households enjoy an average of $2,789 a year in tax breaks while low-income households in Greater L.A. — which includes Orange County — get about $624 a year on average in breaks and subsidies, according to the report, “Imbalance in Housing Aid.”
The disparity can be found across America, with high-income homeowners nationwide seeing $1,549 in annual federal spending versus $416 for low-income folks, according to the analysis. The site says 85 percent of mortgage interest deduction benefits go to high-income homeowners. “Only 11 percent of low-income households receive assistance with their housing costs, and spending per household is nearly four times higher for high-income households compared to low-income,” according to a summary.
It sounds bad, but Los Angeles is a beacon of wealth and government-benefit disparity. Chris Salviati, a housing economist for Apartment List, says that while the wealthy receive about four times the amount of government breaks given to the poor, that divide is closer to 4.5 in Los Angeles. “The disparity shows the gap between the high- and low-income government spending is wider than in the nation overall,” he says.
One reason the average mortgage interest deduction in Greater L.A. ($2,789) is nearly double the national average ($1,549) is that home values are atmospheric here. “A lot of this is related to property value,” Salviati says.
While it's often a burden paying for that expensive pad — the state's median home price is expected to be $561,000 next year, according to the latest California Association of Realtors forecast — home buyers also enjoy the kind of wealth created by ownership. And the federal government is helping to maintain and even expand the gap between rich and poor by helping wealthier households more.
“Higher-income households are generally going to have expensive homes, and they're more likely to have second homes,” Salviati says. “And so they will have higher mortgage costs to deduct. It's directly regressive.”
Apartment List defined low-income households as those making 80 percent of an area's median income; those at 120 percent or higher of the local median were classified as high-income. The report relies on IRS data, HUD statistics and Section 8 figures.
The report's authors, including Salviati, argue that President Trump's initial tax plan would have made the mortgage interest deduction program even more regressive for the middle-income and poor in the United States. They propose cutting more high-end households from the deduction benefit while expanding Section 8 renter benefits to level the playing field.
However, the analyst says this administration doesn't appear to be amenable to making taxes equitable. “With the current administration there hasn't been serious discussion” about fair tax reform, he says.
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