Housing Deductions May Not Be Sacrosanct

Property tax write-offs cost $20 billion, and tax subsidies for local and state housing bond programs add an additional $1 billion.

Who receives these tax breaks? When a congressional committee examined the distribution of homeowner benefits for 2004, it found that people earning $200,000 and more a year, just one-half of 1 percent of all homeowners filing for deductions, pocketed 22 percent of the total write-offs last year.

Homeowners with incomes between $50,000 and $75,000 -- 26.4 percent of all owners claiming deductions -- received just 16.1 percent of the total. Owners with incomes of $30,000 to $40,000 represented 10 percent of all mortgage deduction recipients but got just 3.1 percent of the total tax-savings pie.

Property tax write-offs showed a similar distribution. High-income households were 3.8 percent of all owners claiming property tax deductions in 2004 but received 15 percent of the total. Homeowners with $30,000 to $40,000 incomes were 9.4 percent of those claiming property tax write-offs but received 3.7 percent of the benefits.

In replacing the mortgage interest deduction with a 15 percent credit, the reformers can argue that far more homeowners, the vast numbers who do not itemize their deductions on federal tax filings, will be able to share the tax subsidy goody bag. By lowering the mortgage ceiling to around $300,000, the subsidies would not so heavily favor wealthy owners in high-cost states.

That, in turn, could be supportive of homeownership nationwide for middle-income citizens who either rent or don't itemize on their taxes. Who knows -- the homeownership rate might even go up.

That's the idea anyway. Can it become law? Not in an election year for sure. Could some of it find its way into law someday, as the country grapples with budget deficits, war expenses and disaster relief reconstruction? That's where the odds start looking slightly better.

Kenneth R. Harney's e-mail address isKenHarney@earthlink.net.