The Wall Street Journal has a write-up of a new study by the R Street Institute that looks at how the mortgage-interest deduction is taken zip code by zip code. Conclusion? 
 
 tax preferences, particularly the mortgage-interest deduction, have helped drive up the size of houses by as much as 18% in the nation's most affluent areas while not broadly encouraging people to buy homes. [...] the government's tax subsidies for housing "don't encourage homeownership in any meaningful way. People just end up buying larger homes," said Andrew Hanson, an associate professor of economics at Marquette University who conducted the study along with two other economists. 
 
 Reason's Anthony Randazzo and Dean Stansel were on this story 28 months ago, in a piece titled "The Upper-Class Entitlement: It's time to end the mortgage interest deduction." From that: 
 
 This longstanding incentive, which allows individual taxpayers to deduct up to $1.1 million in home loan–related interest payments from their taxable income, has warped the real estate market and overwhelmingly benefited higher-income Americans, all while failing to achieve its stated policy objection of promoting homeownership. [...] If [the] $1.2 trillion in itemized deductions was instead spread throughout the tax base, the average tax rate could be reduced by roughly a fifth, from 17.8 percent of taxable income to 14.5 percent. Such a tax cut would directly increase the reward for productive, income-generating activity. Closing loopholes such as the mortgage interest deduction while lowering overall rates would lead to a more productive economy. 
 
 Link via the Twitter feed of Neil King. ||||| Today in Ways the United States Tax Code Benefits the Rich: a new study indicates that the politically popular mortgage-interest deduction is useful mostly for helping affluent people buy larger homes. 
 
 Most politicians love the mortgage-interest deduction, because it is seen as "promoting home ownership," which is seen as "promoting the American Dream," both of which are things assumed to be good until you think about them for a few minutes. Here is the actual outcome of the policy, via the Wall Street Journal: 
 
 The ZIP Code-level analysis of Internal Revenue Service data, conducted by a team of economists for the right-leaning R Street Institute, examined how tax benefits are distributed across income levels and major metropolitan areas. The study estimates that tax preferences, particularly the mortgage-interest deduction, have helped drive up the size of houses by as much as 18% in the nation's most affluent areas while not broadly encouraging people to buy homes. 
 
 A remarkably anti-progressive way for our government to squander money! "Encouraging people to buy homes" is a questionable policy goal on its own; subsidizing extra square footage in the homes of the wealthy is an unquestionably grotesque policy outcome. 
 
 Examples of better ways to help Americans with housing: build more low-income housing, give money to low-income people to get their own housing, make people with multiple homes give one of those homes to the poor. 
 
 [Photo: Flickr]
– The tax code is rife with home ownership incentives that are both popular with voters and staunchly defended by lawmakers. But it turns out the breaks mostly just help rich people buy pricier houses, according to a new report from the right-leaning R Street Institute. They "don't encourage homeownership in any meaningful way," the study's author tells the Wall Street Journal. "People just end up buying larger homes." He estimates that in Washington, DC, the subsides have increased the average home size by 1,400 square feet. What's more, the tax breaks are mainly going to the wealthy; homeowners with incomes above $100,000 are four times as likely to claim the benefit as those earning less, because low earners rarely itemize their deductions. It's the kind of report that can anger the right and the left alike. Matt Welch at Reason calls the tax breaks an "upper class entitlement," while Hamilton Nolan at Gawker calls it a "grotesque policy outcome." Barack Obama has repeatedly called for making the benefit available only to those making less than $200,000 a year.