The home-mortgage deduction is widely thought to be "a middle-class benefit. It's not -- 73 percent of it goes to people making a quarter-million dollars or more a year."
Not long before he was to officially retire from the U.S. Senate, Oklahoma Republican Tom Coburn appeared on CNN to discuss the Senate’s report on alleged CIA torture of detainees. But the Dec. 11, 2014, interview, eventually turned to an issue Coburn is better known for -- cutting government spending. Coburn aimed his comments at tax breaks given to people who, he suggested, don’t really need them. "We're going to spend $5 trillion over the next five years in terms of tax benefits to selected groups of people that may not necessarily be (helpful in) growing and creating new jobs," Coburn said. He continued, "Home mortgages -- everybody said that's a middle-class benefit. It's not -- 73 percent of it goes to people making a quarter-million dollars or more a year. So, that's not middle class. That's upper class." We wondered if Coburn’s numbers were accurate, so we took a closer look. Pretty quickly, we were able to find where the 73 percent figure came from. It stems from a report by the Congressional Budget Office, the nonpartisan number-crunching arm of Congress. The May 2013 report attempts to classify which classes of Americans benefit from "tax expenditures." What’s a "tax expenditure"? It’s Washington jargon for a preference written into the federal tax system -- basically, a tax break -- that reduces the amount of revenue the government brings in. Typically, such tax breaks provide financial assistance to identifiable groups of people -- homeowners, in the case of the mortgage-interest deduction. The provision in question allows homeowners to deduct the amount of the mortgage interest they paid during the year when figuring out how much they need to pay in federal taxes. Coburn’s concern was that the deduction disproportionately benefits richer homeowners, rather than middle-class homeowners. It would seem to make sense that richer homeowners would benefit from this deduction more than less-well-heeled homeowners would, if only because the richer you are, the more expensive your house will likely be, and, therefore, the more you will tend to pay in interest. But Coburn’s statistic inflates the degree by which the richest Americans benefit from the tax break. CBO found that 73 percent of the benefits from the mortgage-interest deduction went to the top quintile of Americans, as measured by their pre-tax income. ("Quintile" refers to the top one-fifth of the income spectrum.) The CBO report doesn’t specify the income cutoff to make it into the top quintile. But other data shows that it’s well below the $250,000 Coburn cited. Census Bureau figures for 2012 found that only 2.4 percent of American households earned at least $250,000. This suggests that the top quintile starts somewhere between $100,000 and $125,000. That estimate is backed up by calculations from the Urban Institute-Brookings Institution Tax Policy Center, which found that the top quintile starts at a little over $100,000. Even more persuasively, the Tax Policy Center looked at the exact question Coburn raised. The center didn’t specifically break out incomes above $250,000, but it found that those with incomes above $200,000 took 45.2 percent of the benefits from the deduction. That means that those earning $250,000 would be taking somewhere between 35 percent and 40 percent of the benefits. Thirty-five to 40 percent is certainly a disproportionate share -- those earning $200,000 or more accounted for just 6.3 percent of all taxpayers -- but it’s still only about half of Coburn’s 73 percent share. Coburn "is way off," said Roberton Williams, a fellow at the Tax Policy Center. Coburn’s office clarified the discrepancy by saying that he had been referring to CBO’s average household income for the top quintile in 2011. That was $234,700, or within shouting distance of a quarter million dollars. However, the $234,000 figure is the average income of all households in the top quintile, meaning that many of the households in that grouping earned less than that. We believe the lower figure -- the top-quintile entry threshold of a little over $100,000 -- more accurately reflects the point Coburn was making. Our ruling Coburn said 73 percent of the benefits of the mortgage-interest deduction "goes to people making a quarter-million dollars or more a year." In reality, 73 percent of the mortgage-interest deduction benefits go to those making a little over $100,000 a year, not $250,000 a year. That’s still a large amount of the benefit going to a relatively high-income group, but it’s not as high as Coburn indicated. In reality, 73 percent of the benefits are sent to the top-earning 20 percent of taxpayers, rather than to top 5 percent, as Coburn suggested. We rate the claim Half True.
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