FACT CHECK: Does The Mortgage Interest Deduction Not Affect The Wealthy?

Kush Desai | Fact Check Reporter

New York Democratic Sen. Chuck Schumer claimed that the “mortgage [interest] deduction doesn’t really affect the wealthiest” in a Thursday Senate floor speech.

“Taxpayers will see that the Republicans have capped the amount of mortgage interest they can deduct,” the Democratic Senate minority leader said about the latest GOP tax reform proposal. “Again, right at the middle class.”

Verdict: False

The overwhelming majority of the benefits of the mortgage interest deduction – which allows taxpayers to deduct interest payments on their home mortgages from their tax bills – go to the the wealthiest of Americans.

Fact Check:

House Republicans unveiled a landmark tax reform bill on Thursday. The bill, among other changes to the tax code, would reduce the cap on new home mortgages that qualify for the mortgage interest deduction from $1 million to $500,000.

Schumer and other Democrats have since criticized the GOP bill on the grounds that it benefits wealthier Americans at the expense of the middle and lower classes. In this case, Schumer claims that the mortgage interest deduction does not “really affect” or benefit the wealthy.

The facts suggest otherwise.

The Tax Policy Center (TPC), a nonpartisan think tank, estimates that just 21 percent of all U.S. households will claim the mortgage interest deduction in 2018 under current law, and these households are disproportionately wealthy.

In fact, over 70 percent of households in the top 20 percent of the income scale will claim the mortgage interest deduction in 2018 under current law, the TPC estimates. Conversely, less than a fifth of households in the middle 40 to 60 percent of incomes will claim it.

Wealthy households also capture the lion’s share of the benefits of the mortgage interest deduction. Taxpayers in the top 20 percent of earners receive 73 percent of the deduction’s tens of billions in total annual benefits, according to TPC.

In comparison, TPC estimates that taxpayers in the middle 40 to 60 percent of earners receive just seven percent of the deduction’s total benefits.

This is to say that the mortgage interest deduction benefits the top 20 percent roughly 10 times more than it benefits the middle 40 to 60 percent of Americans.

Schumer claimed that the Republican tax bill’s change to the mortgage interest deduction hits “right at the middle class.” Yet the facts instead suggest that the it hits right at the upper class.

An analysis from March by the Tax Foundation, a nonpartisan think tank, estimated that the GOP proposal for capping the mortgage interest deduction would reduce the top one percent of earners’ after-tax income by .48 percent. The estimated impact becomes progressively less severe going down the income brackets. For example, the GOP’s change would hit the middle 40 to 60 percent of earners’ bottom lines by a mere .03 percent.

Economists for these and other reasons have long criticized the mortgage interest deduction as a “regressive tax subsidy” that helps the wealthy. A New York Times Magazine profile even considered this tax benefit that Schumer defended on the Senate floor part of the “engine of inequality” in America. The facts certainly suggest it doesn’t help.

Schumer’s office did not respond to TheDCNF’s request for comment.

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Kush Desai

Fact Check Reporter