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  • Henry George: Progress and Poverty: An inquiry into the cause of industrial depressions and of increase of want with increase of wealth ... The Remedy
    This is perhaps the most important book ever written on the subjects of poverty, political economy, how we might live together in a society dedicated to the ideals Americans claim to believe are self-evident. It will provide you new lenses through which to view many of our most serious problems and how we might go about solving them: poverty, sprawl, long commutes, despoilation of the environment, housing affordability, wealth concentration, income concentration, concentration of power, low wages, etc. Read it online, or in hardcopy.
  • Bob Drake's abridgement of Henry George's original: Progress and Poverty: Why There Are Recessions and Poverty Amid Plenty -- And What To Do About It!
    This is a very readable thought-by-thought updating of Henry George's longer book, written in the language of a newsweekly. A fine way to get to know Henry George's ideas. Available online at progressandpoverty.org and http://www.henrygeorge.org/pcontents.htm

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« How much land does a family need? What are the implications for our country? | Main | Grocery Store Parking Lot: Sprawl in Microcosm »

February 05, 2009

Statistics of Income: Mortgage Interest and Real Estate Taxes

I've been exploring the IRS Statistics of Income data for 2006 which permits one to download spreadsheets of data and do one's own calculations on the data.  I've stumbled across some data that tickles my Georgist curiosity.   The tables break returns out by AGI (not the greatest option in the world -- a lot of income disappears before that point) but the observations are still of interest.

Table 2.1 looks at only returns that itemize deductions, 49.2 million returns out of the total 138.4 million filed (35.5%), which are reported on Table 1.2.  I'll use the column numbers provided in the spreadsheet, since I've added dozens more. Column 75 shows the total Home Mortgage Interest deducted as $443 billion, and Column 66 shows the Real Estate Tax deducted as $156 billion -- 35% the amount paid in interest.  39.8 million returns deducted interest; 42.6 million returns deducted Real Estate Taxes.

I'm intrigued that people don't seem to mind paying large amounts of interest to a mortgage lender, for the privilege of paying off the previous owner of their home, but balk at paying roughly 1/3 as much to the community which provides the services which make that home and community a good place to live! 

Further, the federal taxpayers who itemize deducted $265 billion in sales tax and state/local income taxes.  So they deducted a total of $421 billion in taxes, and interest of $443 billion.

A 2006 Federal Reserve Board study found that for the top 46 metro markets, land value represented 51% of the value of single family homes in 2004.   Applying that percentage to the mortgage interest amount deducted, we could say that $222 billion of mortgage interest was deducted that went to paying the interest on land the taxpayer purchased from someone else, and the other $222 billion went for paying for the house on that land.

If we accept that state and local government costs $421 billion, wouldn't we rather be paying $222 billion in interest to finance the purchase of the houses we live in, plus $421 billion in taxes on land value, and not pay either principle to the seller or interest to the lender for the land value?

Posted on February 05, 2009 at 05:27 PM in better cities, connect the dots, cost of living, cui bono?, economic justice, ending poverty, equality, financing education, financing infrastructure, FIRE sector, free lunch, infrastructure, land value taxation, little people pay taxes, one solution for many problems, paying twice, poverty's cause, public spending, sales taxes are wrong, tax reform, taxation, wage taxes, wealth distribution or concentration |

Tags: housing affordability, land value taxation, mortgage interest deductibility, single tax , tax reform

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Statistics of Income: Mortgage Interest and Real Estate Taxes

Posted by: guanacaste costa rica real estate | July 27, 2010 at 12:07 PM

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