"I would essentially throw out the entire tax code, along the lines of the Bowles-Simpson recommendation. Get rid of the vast majority of the exemptions, credits, and loopholes. I would keep things like the home mortgage interest deduction, the charitable credit and the [research and development] credit. But simplify it and dramatically lower the rates. I think we'd have a far fairer system."
The Context: In an interview with US News, Pataki covered a variety of topics including laying out his stance on the American tax code. In addition to this short list of credits and deductions he would like to maintain, he would "suggest that we have a tax rate on manufacturing that is the lowest in the developed world" and implied a similarly substantial cut to the overall corporate tax rate.
Part 2 of 2
This entry is a continuation of yesterday's Part 1, in which we looked at how much money is claimed in tax returns across the country as mortgage interest paid.
So, mortgage interest—as a basis for supporting housing and middle-class economic stability and upward mobility—varies greatly across the country tied to a variety of several other fluctuating variables. The wide range of interest payment amounts is the result of the housing market and the financial markets. It is affected by variations in homeownership rates and property values (which in turn affect local school funding). It is affected by the types of mortgages and their interest structure which historically are offered on both case-by-case and neighborhood-by-neighborhood bases, as banks determine both the risks of the borrower and the property. (Redlining was outlawed decades ago, but last decade's foreclosure crisis carried with it indications of a more sophisticated 21st-century version.) Interest rates also change over time, and thus newer neighborhoods and gentrifying cities will see different average rates than areas with an established population and little population change. Consider cross-referencing yesterday's maps with the atlas entries on housing affordability, homeownership and renting, and population density (these links will take you to the atlas entries, click the maps below to enlarge).
As a result, the interest deduction is a difficult policy to construct as one that supports homeowners evenly across the board. In other words, as each of these contributing factors affects the value of the deduction and as household incomes also vary, understanding the popularity and value of the deduction means asking
Which parts of the country stand to benefit the most and the least from the Home Mortgage Interest Deduction?
Answering the question requires two sets of maps. First, we need to examine the regional distribution of the deduction itself and ask what percentage of tax returns claim mortgage interest payments in an effort to understand which communities rely more heavily on receiving that deduction.
Next, we should compare this to the value of the deduction relative to local incomes. Zooming out beyond the scope of individual household costs or ownership, we can think about what this deduction also means to communities and local area and regional economies. Receiving this deduction means greater amounts of money for other spending, saving, and investing. Where interest amounts are relatively low compared to income levels, this impact is minimal. On the other hand, where interest amounts are relatively high compared to income, its effects could be substantial.