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Bailout for McMansion Millionaires

McMansion

Republicans are pushing to add more tax breaks for the rich into the Obama stimulus.

An idea to use taxpayer money to subsidize lower mortgages is gaining traction. The Register-Guard endorsed it today.

But most of the tax break would go to the rich, who are unlikely to spend it to stimulate the economy.

Here’s the math using calculators and interest rates from Bankrate.com and assuming a subsidized interest rate drop of 1 percent to about 4.4%, as discussed by Republicans:

Double-wide Schmuck:

Mortgage: $100,000
Monthly payment at current interest rate: $560
Payment at new subsidized rate: $499
Savings: $61
% Savings: 11%

McMansion Millionaire:
Mortgage: $500,000
Monthly payment at current interest rate: $6,646
Payment at new subsidized rate: $ 4,996
Savings: $1,650
% Savings: 25%

So the millionaire saves 27 times more than the work-a-day loser. No wonder the Republicans are so excited about this idea.

A big chunk of the difference is that McMansion “jumbo” loans now pay about 1.5 percentage points more interest because they are a greater risk to lenders. So they benefit the most from the Republican tax break.

Most economists agree that big tax breaks for the rich will do little to stimulate the economy. The rich already buy whatever they want and will just pocket the money. Poor people on the other hand will spend the money quickly for basic necessities.

Most poor people don't even own a house. Half of the people living in Eugene are renters.