By Matt Dornic
Published April 15th, 2011
Former Senator Russell B. Long famously described the concept of tax reform as “Don’t tax you, don’t tax me, taxthat fellow behind the tree!” Assuming Long’s analogy accurately describes America’s take on taxes, one can’t help but wonder: Who is that poor sap hiding in the bushes? The answer is simple—he’s an American home owner, hiding for good reason:
Did you know U.S. home owners already pay 80% to 90% of all federal income tax collected? And now the government wants more. Rather than curbing wasteful spending, some policymakers want Americans to part with deductions like property taxes and mortgage interest—a perk of home ownership for more than 80 years.
During an April 13, 2011, speech on deficit reduction, President Obama said, “The tax code is also loaded up with spending on things like itemized deductions. And while I agree with the goals of many of these deductions, like home ownership or charitable giving, we cannot ignore the fact that they provide millionaires an average tax break of $75,000 while doing nothing for the typical middle-class family that doesn’t itemize.”
What the president’s carefully-worded statement ignores is the huge number of typical middle-class families who do itemize their tax returns. The reason most taxpayers itemize is because they are home owners—91% of families currently claiming the mortgage interest deduction (MID) earn less than $200,000 annually and 65% earn less than $100,000 per year. Not only would a repeal of the MID hit middle-class families square in their wallets, experts say it would be a devastating blow to the housing market—dropping home values by up to 15%. The notion that deductions for home ownership do nothing for the middle class is wildly inaccurate.
With Tax Day right around the corner, now’s the perfect time to determine just what the MID means to your family. Take a look at your federal tax form Schedule A (if you are filing tax form 1040) and see line 10. That line shows the deduction for your home mortgage interest—$12,200 on average, translating to a total savings of $3,050 for the typical U.S. home owner.
No small chunk of change. Loss of the MID would have serious implications for American families. Saving the average household over $3,000 per year, the MID means:
- A year’s worth of groceries for two people: $2,694 on average.*
- Household utilities for a year (heating, cooling, fuels and public services): $3,477 on average.*
- 12 months of car payments for the average family: $3,269.*
- The average family’s annual entertainment expenses: $2,698.*
- Your family’s health care for a year: average expense of $2,853.*
*Figures based on a 2009 U.S. Department of Labor 2009 Labor Statistics Report
If you’re like me, you’re frustrated by the government’s runaway spending and discouraged by the deficit. But taking away the few perks enjoyed by the people already paying most of this country’s taxes is an unfair and unacceptable way of confronting the national debt.