Your Favorite Tax Break Isn’t as Great as You Think

"Tax specialists of different political leanings are in surprising agreement about the poor design of top breaks."Laura Saunders writing for The Wall Street Journal (10/20/17).

"The tax breaks Americans love most are actually some of the least effective given their cost.
If these provisions were based solely on what’s best for America, the mortgage interest deduction would end or be tilted toward lower earners, tax specialists say. Health-insurance premiums paid by employers would be taxable. Write-offs for charitable gifts would be tightened, and the deduction for state and local taxes would be limited or ended. Investment incentives, such as the lower rate on long-term capital gains, would be reconfigured.'
"As a result, the $1.3 trillion a year that these and other tax breaks for individuals 'cost' Uncle Sam—that is, taxpayers as a whole—would probably shrink. So would market distortions they encourage: Health-care prices might moderate, and Americans might put less of their savings into homes and more elsewhere."
A"survey of specialists at the Tax Foundation, the Tax Policy Center and the Committee for a Responsible Federal Budget" concluded that the mortgage interest deduction gets a D rating. The "lower rate for long-term capital gains"gets the highest rating of B-. Unfortunately Congress pays more attention to lobbyists than to non-partisan policy analysts.
Most low- and middle-income homeowners don't reap any benefit from the mortgage interest deduction before tax "reform" and far fewer will get a reduction under the new law going into effect in 2018. Too many homebuyers bought a more expensive home than they could afford because real estate agents told them they would save on taxes. Yet most first time homebuyers never benefited at all due to the inflation-indexed standard deduction.