Mortgage Interest Deduction Favors Blue States
The home mortgage interest deduction benefits Democrat-voting states most! Is the fix in?
The benefits of the mortgage interest deduction are not evenly distributed among the states. … [T]he per capita tax benefit from the mortgage interest deduction for Californians is more than two and a half times that for Texans. Marylanders get nearly five times the benefit of citizens in neighboring West Virginia.
We always knew the mortgage interest deduction was unfair — favoring those in high tax brackets with big houses over renters and low-income homeowners. But until we did the calculations — as far as we know, the first of their kind — we did not suspect the geographic dispersion of tax benefits would be so large. …
In addition to the wide disparity in benefits, the other striking feature about the mortgage interest deduction is how well the subsidy correlates with Democratic strength. … [The fourteen] states with the highest per capita benefit were states captured by Obama in the 2008 election [Maryland, District of Columbia, California, Connecticut, Virginia, New Jersey, Massachusetts, Colorado, Washington, Nevada, Hawaii, New Hampshire, Minnesota, Delaware]. In the six states with the lowest per capita benefits [West Virginia, Mississippi, North Dakota, South Dakota, Arkansas, Oklahoma], Republican challenger John McCain won the vote. … Obama won the popular vote in 22 out of the top 26 jurisdictions, compared with 8 out of the 25 states with the lowest per capita benefits.
This is implying causation when none exists. Housing prices are highest in a handful of metropolitan areas and those have long voted Democratic. But it’s absurd to imply that the mortgage interest deduction was somehow a way to buy votes for Dems.
Regardless, it’s doubtless true that some parts of the tax code — the mortgage interest deduction and the write-off for state and local taxes — disproportionately benefits the Blue states. Or, again, actually just the huge population centers within them. (Maryland and Virginia, for example, aren’t particularly expensive — aside from the parts within commuting distance of Washington, DC.) Then again, other parts of the tax code — notably the massive subsidies for agriculture — disproportionately benefit Red states.
And, of course, studies repeatedly show that the net effect of federal spending results in a quite substantial net transfer of wealth from Blue states to Red. That’s not exactly shocking: To the extent that we use the tax code and the budget to redistribute wealth, we do it from richest to poorest. And the Red states are generally poorest.
via Glenn Reynolds