The amount of welfare that goes to the poor versus the welfare that goes to the wealthy and giant corporations is like comparing the size of a single cliff to an entire mountain. Is the modern state largely a committee for managing the affairs of the rich?
This is because the US government spends more than twice as much subsidizing the tax break for affluent homeowners, who would most likely be able to afford their homes anyway, as it does on helping the poorest families pay rent and avoid homelessness – $60.1bn versus $29.9bn in 2015. As Congress tackles tax reform, advocates and economists of all political stripes are appealing for the tax break to be addressed, but the chances of that are uncertain.
A new study by Apartment List, a rental aggregator, shows that over half of high-income households claim the tax benefit, called the mortgage interest deduction (MID) because it reduces a filer’s taxable income by the amount of interest they owe on their mortgage. More than $10bn goes to households with incomes in the top 1%.
By comparison, only one in four Americans in need of rental housing actually receive it. In fact, the rental-assistance system – which is called Section 8 and generally covers costs that exceed 30% of someone’s income – is so overburdened that until recently, the city of Los Angeles had declined to even accept new applications for a voucher for a staggering 13 years, and New York’s waitlist has been closed since 2009. When Los Angeles finally started accepting new applications again, for only two weeks in October, almost 200,000 people applied for only 20,000 spots on the waitlist.
Indeed, in none of the country’s 25 largest cities do low-income residents receive more than half of the money that goes on housing benefits. This despite the fact that stable housing has been linked to improved educational outcomes, health and psychological wellbeing. Mostly, the cash goes to the well off.