The case against tax deductions
Trump's tax cuts were, weirdly, feared by homeowners and charities. Normally, tax cuts make people richer, and richer people spend more money on housing and charity.
But, but, but: Both those items have historically benefited from massive tax expenditures, leading to worries that they would be worse off after the tax cuts.
Driving the news: According to the latest data from the IRS, the tax cut worked much as everybody expected it would. The number of people itemizing their taxes plunged by more than 65%, with similar falls for the number of people deducting mortgage interest and charitable contributions.
Yes, but: The other shoe hasn't dropped.
- Only 8% of taxpayers now deduct mortgage interest, yet home prices continue to rise, with no indication that the new law changed anything at all.
- Similarly, the charitable contribution deduction has had no visible effect on charitable contributions. Total giving rose by 0.7% to a new record high in 2018, despite a late-year stock market plunge.
The bottom line: Tax deductions are much easier to create than they are to abolish; they're also hugely expensive. The evidence strongly implies that almost all of them are a waste of money.