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