(Bloomberg View) – Here is the basic argument against using tax deductions to encourage certain behavior — in this case, buying houses.
It's from the late, great Harvard Law School tax scholar Stanley Surrey, as quoted by journalist T.R. Reid in his fun new tax reform book, "A Fine Mess":
The federal government wants to help some Americans pay their mortgage. Here's how it works: For a couple with $200,000 of income, and a mortgage interest payment of $1,000 per month, the government will pay the bank $700 and the homeowners will have to pay only $300. For a couple with $20,000 of income and a mortgage interest payment of $1,000 per month, the government will pay $190, leaving the couple to pay $810. For a couple making less than $10,000, the government will pay zero – so the low-income couple has to pay the full $1000 of mortgage interest.
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