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I agree that poor-er people have much higher marginal utility for $1, but I think that observation supports this critique! The 'cost' of spending $1,000,000 on

I agree that poor-er people have much higher marginal utility for $1, but I think that observation supports this critique! The 'cost' of spending $1,000,000 on a wealthy person should be measured in terms of how much utility less-wealthy recipients would get out of that money. In the same way, your example with the standard deduction also, I think, supports this critique: either standard deduction is marginal once you reach a high enough level of income, but at lower levels of income it is much, much better (and results in higher tax rebates for poor people). It's an example of a tax policy that does the reverse of the mortgage tax deduction - it becomes less proportionally beneficial at higher levels of income. P.s. I may have misread your comment, and if we are actually in agreement I apologize!

novok 5y ago
I'll be honest, the mortgage tax deduction doesn't deduct that much either as a proportion of income if you make a multi six figures income, much like the standard deduction. For example, if you have a $1mm house, your interest on a $800k mortgage @ %2.7 APR is a ~$30k/yr interest deduction, which is in the same range as the standard deduction, representing around $15k/yr paid in less taxes. For those kinds of people, it's easier to just make $30k/yr more per year too. These people often live in states with an income tax, so they can't deduct their property tax anymore either, since it gets dwarfed by their state tax bill. On a dollar aggregate, they of course get the most benefit from the deduction, because most middle & lower income americans don't pay a lot of taxes to get much of an aggregated benefit. But as a percentage of their own income, its not actually that much!
- Retric 5y ago
  The mortgage deduction on it’s own isn’t such a big deal but it suddenly makes a lot of things tax deductible which aren’t if you take the standard deduction. The tax code is complex largely to enable such seemingly subtle interactions.
  - novok 5y ago
    What kind of stuff becomes tax deductible once you get beyond the standard deduction, that doesn't involve having a business, which doesn't have that standard deduction limit anyway? Charitable donations? Medical expenses if you have a really bad time and need to spend more than %4 of your income to cover it?
    - Retric 5y ago
      It’s a long list, the major one is state income taxes, also charitable deductions can cover charities you create which can be a big deal if something you’re doing anyway could qualify. However, some oddities like theft of investments such as gold or artwork and even some fines can be deductible. So sure on it’s own the mortgage tax deduction isn’t always huge, but it’s rarely the only deduction someone could take.
      - novok 5y ago
        You can't deduct state & property taxes beyond $10k anymore, that deduction has been neutered significantly. Charitable donations are not a tax dodge scheme for even the people who make $500k/yr, it's way too complicated and expensive to make it a vehicle to direct tax free spending. As an estate tax dodge, yes it is a thing, but again, many high income people don't have $5mm sitting around where that becomes a good idea too. Theft is also not a reliable tax deduction, and if it was, it would be fraud! And you just lost something!!! I assure you the vast majority are not doing this. So please, tell me what actual tax deductions you can take as a high income W2 employee that is actually significant

novok 5y ago

I'll be honest, the mortgage tax deduction doesn't deduct that much either as a proportion of income if you make a multi six figures income, much like the standard deduction. For example, if you have a $1mm house, your interest on a $800k mortgage @ %2.7 APR is a ~$30k/yr interest deduction, which is in the same range as the standard deduction, representing around $15k/yr paid in less taxes. For those kinds of people, it's easier to just make $30k/yr more per year too. These people often live in states with an income tax, so they can't deduct their property tax anymore either, since it gets dwarfed by their state tax bill. On a dollar aggregate, they of course get the most benefit from the deduction, because most middle & lower income americans don't pay a lot of taxes to get much of an aggregated benefit. But as a percentage of their own income, its not actually that much!

Retric 5y ago
The mortgage deduction on it’s own isn’t such a big deal but it suddenly makes a lot of things tax deductible which aren’t if you take the standard deduction. The tax code is complex largely to enable such seemingly subtle interactions.
- novok 5y ago
  What kind of stuff becomes tax deductible once you get beyond the standard deduction, that doesn't involve having a business, which doesn't have that standard deduction limit anyway? Charitable donations? Medical expenses if you have a really bad time and need to spend more than %4 of your income to cover it?
  - Retric 5y ago
    It’s a long list, the major one is state income taxes, also charitable deductions can cover charities you create which can be a big deal if something you’re doing anyway could qualify. However, some oddities like theft of investments such as gold or artwork and even some fines can be deductible. So sure on it’s own the mortgage tax deduction isn’t always huge, but it’s rarely the only deduction someone could take.
    - novok 5y ago
      You can't deduct state & property taxes beyond $10k anymore, that deduction has been neutered significantly. Charitable donations are not a tax dodge scheme for even the people who make $500k/yr, it's way too complicated and expensive to make it a vehicle to direct tax free spending. As an estate tax dodge, yes it is a thing, but again, many high income people don't have $5mm sitting around where that becomes a good idea too. Theft is also not a reliable tax deduction, and if it was, it would be fraud! And you just lost something!!! I assure you the vast majority are not doing this. So please, tell me what actual tax deductions you can take as a high income W2 employee that is actually significant