Money is Policy JRT Housing-Money 4-26lores | Page 10
Fig ur e E
Estimated Cost of Largest Federal Tax Expenditures (Individuals) (in billions of dollars)
Tax Expenditure
The Low-Inome
Housing Tax Credit
is the only federal
program of any
consequence
that is dedicated
to increasing the
supply of affordable
Exclusion of Net Pension Contributions and Earnings 156.1 181.0 212.6 244.0 277.2 1070.9
Exclusion of Employer-Sponsored Health Care 155.3 164.7 170.3 180.6 189.5 863.1
Preferential Tax Rates on Capital Gains and Dividends 130.9 133.6 135.9 137.3 139.9 677.7
Earned Income Tax Credit (EITC) 73.0 73.4 74.4 75.6 77.0 373.4
Deduction of Mortgage Interest 59.0 63.6 72.4 78.7 83.4 357.0
Deduction of State and Local Taxes 65.4 69.3 74.1 78.0 82.0 368.8
Subsidies for Insurance Purchased
through Health Benefit Exchanges 41.3 55.8 68.9 77.9 82.7 326.6
Child Tax Credit 55.0 Deduction of Charitable Contributions
(other than education and health) 41.5 42.8 44.1 45.2 46.6 230.5
Exclusion of Untaxed Social Security Benefits 38.4 40.2 42.5 45.0 47.8 213.8
Deduction of Property Taxes 31.2 33.3 36.4 38.5 40.5 180.0
Exclusion of Capital Gains at Death 32.9 33.8 35.6 37.7 39.6 179.4
Exclusion of Capital Gains on Sales of Principal Residences 29.2 32.1 33.4 34.9 36.8 166.8
10
54.6
54.2
53.6
53.1
270.5
Source: Joint Committee on Taxation, Estimates of Federal Tax Expenditures for Fiscal Years 2016-2020
(January 30, 2017).
From a cost perspective, the federal govern-
ment’s housing-related tax expenditures
overwhelmingly benefit homeowners and
are defended as promoting homeownership,
a socially desired objective. In fiscal year
2017, the deduction for mortgage interest
on owner-occupied properties ($63.6 billion),
the deduction for local property taxes on
real property ($33.3 billion), and the exclu-
sion of capital gains on sales of principal
residences ($32.1 billion) are projected to
rental homes.
FY FY FY FY FY Total
2016 2017 2018 2019 2020 2016-2020
account for about 90 percent of the cost of
all housing-related tax expenditures. In fact,
the mortgage interest deduction is one of
the largest tax expenditures for individuals in
the entire federal budget (See Figure E).
The largest tax expenditure specifically
designed to support rental housing is the
Low-Income Housing Tax Credit program
with a projected cost of $8.5 billion in fiscal
year 2017, roughly one-eighth the cost
of the mortgage interest deduction. The
Housing Credit supports the construction
and preservation of rental homes that are
affordable to some of our nation’s most vul-
nerable families. The program, which lever-
ages private investment funds, has financed
nearly three million affordable rental homes
that have housed 6.5 million low-income
families since it was first established in
the Tax Reform Act of 1986. 9 It is the only
federal program of any consequence that is
dedicated to increasing the supply of afford-
able rental homes.
The federal government also supports
housing through the annual Congressio-
Money is Policy: How Federal Housing Dollars Are Spent