Inside Trump's Housing Proposal: A Rich Guy in Populist Clothing? - trump house2

It appears President Trump's new housing proposal amounts to a tax break for millionaires and billionaires. If Democrats want to score political points, they would roll with this populist rally cry.

"Most of the headlines and soundbites from [Trump Treasury Secretary nominee Steve] Mnuchen et al center on the vague but superficially appealing notion of 'capping' mortgage interest deductibility," writes Hedgeye U.S. Macro analyst Christian Drake in this morning's Early Look. "As we understand it, the actual proposal is almost exactly opposite of what it sounds like."

Under the current system ... homeowners can deduct mortgage interest on debt up to $1 million. That equates to around $45,000 in deductible interest assuming a 30-year mortgage at current rates of 4.5%.

Under the new system ... total itemized deductions would be capped at $200,000. As the Chart of the Day below illustrates, hitting that $200,000 cap would support a mortgage balance of $4.4 million under the same assumptions.

"To make it a little more realistic (it’s unlikely mortgage interest would be the lone itemization item), let’s consider the situation for the top 1% of income earners.

 

The cutoff for the 1% income threshold in the US is $390,000.  Applying liberal assumptions for medical expenses, state & local taxes and charitable contributions (see HERE), non-interest itemized deductions would total $100,000, leaving $100,000 for mortgage interest – which would support a mortgage of greater than $2 million or two times the cutoff under current law."

 

More to be revealed.

Inside Trump's Housing Proposal: A Rich Guy in Populist Clothing? - MID CoD