It is widely accepted that ownership of assets – a home, savings accounts, stocks and investments, a business – is a cornerstone of family financial security. Assets provide a cushion against temporary setbacks and allow for an investment in greater opportunities and economic success in the future. Government policies have long promoted asset building through a combination of direct expenditure programs and, especially, through preferential tax treatment in the federal tax code of home mortgages, savings account contributions, capital gains income, and other items. States, too, promote asset building, in large part by “piggybacking” on federal itemized deductions for such items as the home mortgage deduction and property taxes on state income taxes.
A new report from CFED and the Annie E. Cassey Foundation (AECF) calculates annual federal expenditures on asset-building policies to be $384 billion. Of this total budget, ninety per cent of benefits, or $348 billion, is delivered through the tax code, while just 10 percent, or $37 billion, takes the form of direct government expenditures. Most of the latter is in the area of scholarships and grants for post-secondary education. Conversely, the vast majority of the total federal budget in the areas of homeownership, savings and investment, retirement accounts and business developments takes the form of tax credits, deductions, and lower tax rates.
Here’s the thing. These policies to promote savings, investment and ownership primarily subsidize the wealthy, and offer few, if any benefits to low- and moderate-income households. Take, for example, homeownership. According to the report: Read the rest of this entry »