The home mortgage interest deduction should eventually be eliminated in the United States

C–1: The mortgage interest deduction (MID) has contributed to the growing economic inequality in the US. At the beginning of the debate, my opponent claimed that I “failed to show how the MID causes inequality.” However, in making this claim, he completely disregards the arguments I made in round two. As I clearly showed, the MID contributes to the growing economic inequality for at least two reasons: 1. This deduction is only available to itemizing taxpayers, who are mainly individuals in the middle and upper income tax brackets. As a 2008 study found, over 86% of individuals with annual incomes between $75,000 and $125,000 itemized. However, a mere 23% of those making less than $40,000 itemized. 2. Making matters worse, the average value of the MID increases with income. Individuals making less than $40,000 a year who opt to itemize receive an average of only $91 from this deduction. However, individuals earning $250,000 or more receive an average of $5,459. Clearly, most middle and upper class Americans benefit greatly from the MID. On the other hand, the few lower-class Americans who benefit from this deduction do so only slightly. My opponent even appeared to concede these points later in his argument. As he stated himself, “Of course, [the average value of the MID increases with income]; someone who makes more will spend more and some of the spending is offset by tax deductions. Oddly, my opponent then went on to disregard this evidence. Following the above admission, he presented a study which supposedly found that economic inequality was on the decline. As he claimed, “A paper from economists at the University of Chicago shows that real inequality may have actually fallen between 1994 and 2005.” My opponent then erroneously concluded that the MID could not possibly cause economic inequality, since it had been in place between the years 1994 and 2005.” Surprisingly, the study in question doesn’t even support my opponent’s claims. The authors of this study simply stated that, “Around half of the increase in conventional inequality measures during 1994 – 2005 is the result of using the same price index for non-durable goods across different income groups.” Clearly, this research article doesn’t deny that economic inequality is increasing. It merely suggests that some previous studies may have overestimated the rate of the increase during the relevant period. My opponent’s study and numerous others show that economic inequality has clearly continued to rise over the past decade. However, even if the opposite were true, my first contention would still be valid. This is simply because there are many factors which collectively determine the distribution of wealth in any given nation. Some of these factors, such as welfare programs, tend to distribute money to the poor. Others, such as the MID, probably tend to distribute money to the wealthy. The overall trend in economic equality depends on the balance between these factors. Even if economic inequality declined, some individual factors would still tend to distribute money to the rich. Therefore, we cannot tell if the MID tends to distribute money to the wealthy simply by looking at overall trends in equality. To determine weather or not my first contention is valid, we must examine the MID individually as I did in round two and again in this round. As my analysis clearly shows, this deduction does indeed distribute money to the wealthy. Therefore, by definition, it must contribute to the economic inequality in the United States. C–2: The MID does not create an incentive for homeownership. My opponent states that, “Pro makes the mistake of thinking that if homeownership rates remain level, then that is a good reason to eliminate MID.” My opponent has clearly misinterpreted my argument. I never claimed that the MID should be eliminated solely because it has not increased homeownership rates. Instead, I argued that this deduction should be eliminated because it provides few or no benefits (e.g. it does not provide an incentive for homeownership); yet, this deduction has several negative consequences. My opponent then went on to claim, “And as that would be a major source of deductions for those making less than the median income and owning a home, the loss of MID would impact them the greatest.” This argument is false. The median income in the US is only $40,000. As I stated above, only 23% of those making less than $40,000 choose to itemize. Therefore, eliminating the mortgage interest deduction would not affect 77% of these low income Americans in any way whatsoever. Finally, my opponent stated, “Moreover, for low income individuals that do get the MID, it would likely very much be an incentive for them to own a home.” This suggestion is also incorrect. As I stated above, individuals with annual incomes less than $40,000 who opt to itemize receive an average of only $91 from this deduction. This is hardly enough to provide an incentive for homeownership.