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Own A Home? You’re On Welfare.

Well, at least that’s what a columnist in Time magazine thinks. (It is in the current paper issue, so it’s not available online yet.) I never really thought about it that way, but he is kinda right – owning a home does provide the homeowner with a kind of welfare in several different ways. From the $8,000 tax credit that first-time homebuyers are receiving, to the 80% of mortgage loans owned (and subsidized by) Fannie Mae/Freddie Mac, to the income tax deductions for mortgage insurance paid, and to the deduction for property tax bills, homeowners do, in fact, benefit from a form of welfare directly from the government. All these credits and deductions add up to over a staggering $110 Billion dollars a year in government giveaways to people who own homes – which is 33% of what we spend on all entitlement programs combined (2006 numbers equal $354.3 billion and includes Medicaid, food stamps, family support assistance (AFDC), supplemental security income (SSI), child nutrition programs, refundable portions of earned income tax credits (EITC and HITC) and child tax credit, welfare contingency fund, child care entitlement to States, temporary assistance to needy families, foster care and adoption assistance, State children’s health insurance and veterans pensions.) Most of these tax benefits go to people in the upper end of the income spectrum, according to the article, and they also push us a people to buy houses we cannot afford, as we think that we’ll get some of it back on our taxes. I will never forget an old boss of mine telling me to look at houses WAY out of my price range, because “you can deduct the interest payments” each year. Yea, well, hey boss – I still have to make those 12 monthly payments to the mortgage company before I can get that interest back!

Many people call this kind of welfare the “hidden welfare state”, or welfare for the middle to upper class that doesn’t come in the form of food stamps. (See article on the hidden welfare state) The hidden welfare state “refers to tax expenditures (deductions) with social welfare objectives: tax deductions for retirement saving, charitable contributions, higher education, and the home mortgage interest deduction. All of these deductions benefit constituencies with considerable disposable income.”

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While I do agree that it is obviously a form of welfare, as the author of the article states, I am not sure if it is a good or a bad thing for our society. And while I am not one to think the government has no place in our lives or our social make up, there are others who think the government should be out of our lives entirely – but that would remove all these subsidies that are handed out. So… I don’t know if I agree or disagree with the author, but thought it would make for an interesting discussion here on My Two Dollars, and I hope you weigh in with your thoughts.

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Comments (12)

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  1. What you subsidize you get more of….. yes, these are subsidies to encourage and reward home ownership. Not sure I would term it welfare, though, more like a reduced tax rate or keeping more what you’ve earned.

  2. Katharine Toth says:

    I’d never thought of it that way… In general, I think the federal government has its priorities a bit backwards in regards to welfare programs, but I understand how hard it is to change things at a federal level.

    However, as someone who just purchased a house, I’m all for the tax credits TYVM. lol.

  3. Ron says:

    Don’t forget the welfare given to owners of section 8 housing or the fact that landlords would probably raise rents if their expenses (taxes, maintenance, repairs) weren’t deductible.

  4. Annie Jones says:

    The tax deduction for mortgage interest is nice since we’re in the early stages of our mortgage. But it was never the reason we bought a home, and it will never be reason enough for us to hang on to the mortgage if/when we are in a position to pay it off early.

    I think some of the people who believe government should stay out of personal lives often forget that they would lose a few benefits if government were to suddenly butt out.

  5. Elizabeth says:

    Our mortgage interest last year was under $5000…. so we took the standard deduction. Just because you own a home doesn’t mean you get tax benefits. Our property taxes weren’t even deductible because they were only $2k. No ‘welfare’ here.

  6. While I understand the sentiment behind calling a mortgage interest deduction “welfare” I’m not sure I agree with the use of that term.

    I would most likely think of “welfare” as either receiving something from the government for nothing, or having the government pay your income.

    Some one getting a mortgage interest deduction is still paying taxes, and by getting back a deduction they are getting back their own money, not taking something from the government for free.

    Paul

  7. I disagree with this, and even if the characterization could be justified, I think its a dangerous one to make.

    I don’t think we need to be doing anything to discourage home-buying at this stage of our economic crisis.

    I still think owning a home is one of the best investments you can make, and if looked at over the long haul, I think it still proves to be true.

  8. Toddriffic says:

    While I agree with the majority of these benefits in order to continue to encourage new home buyers, I do think there needs to be a limit or at least a scale for higher income brackets. There’s no reason a person making $1M per year should be able to write off interest the same way someone who makes $50K does…

    That may be an overstatement (in that they probably don’t) but if the article is true (and the majority of this money is for people in the higher income brackets) I definitely see something wrong with that.

  9. Kyle says:

    I am paying an awful lot in mortgage payments just to be on welfare. I certainly don’t look at it that way.

  10. JoeTaxpayer says:

    I find the position Time takes to be curious and offensive. I start out with 100% of my earnings, and the government chips away at it. Time suggests that what I get to skim off the top is welfare? Why not simplify the approach, and claim that every dollar I get to keep is by the grace of congress and not by my own labor, deem it all welfare?
    I pay my fair share of taxes and then some, and I consider it the cost of freedom and safety. If I need to pay more to help my fellow human get health care, and not die for lack of proper medicine, I’ll pay that as well. The Time implication just rubs me the wrong way, as if none of it was mine to begin with.

  11. Tim Moon says:

    This doesn’t even count or consider all the giveaways to corporations like oil, logging, mining and farming companies…and many others (steel, railroad, telecoms, etc). Corporate welfare is huge and I would venture that the amount at least rivals that of the handouts you mention.

    This is a great way to look at home ownership though because it demonstrates how the government helps average people – Democrats and Republicans alike. Even the ones who hate the government.

  12. David says:

    Absolutely Tim – people only want to put down govt. assistance when it is for poor people. But they are more than glad to accept it when it is for home ownership or corporate interests. :)

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