Business Week notices that struggling homeowners are taking an unexpected one-two punch: First, they lose their home, and then, because they’ve lost access to the massive tax subsidies for home ownership, their taxes go up:
People across the U.S. have seen their tax bills increase due to the housing bust. On federal tax returns, claims for the mortgage interest deduction dropped by 14 percent, from 2007 to 2009, IRS data show. For 2010, preliminary data indicate that use of the write-off fell by a further 7.2 percent. The decline saved the U.S. government between $13 billion and $26 billion from 2007 to 2010, estimates Andrew Hanson, an assistant professor of economics at Georgia State University who has researched the tax break.
It’s almost as if offering massive tax breaks to subsidize home ownership isn’t such a good idea.