The case against tax deductions
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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.
