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How can they take away the mortgage interest deduction?

It's one of the deficit commission's proposals:

?The mortgage interest deduction is one of the pillars of our national housing policy,? said Michael D. Berman, chairman of the Mortgage Bankers Association. ?Limiting its use will have negative repercussions for consumers and home values up and down the housing chain.?...

But:

[O]nly those in the top third of wage earners even itemized their deductions, meaning that two-thirds of taxpayers weren?t eligible for the break.

?No one can make a serious intellectual argument in favor of the mortgage interest deduction,? [said Calvin Johnson, a tax professor at the University of Texas]. ?Why should the government subsidize homeowners rather than renters? The only thing it?s good for is middle-class votes.?

Then why did "House Speaker Nancy Pelosi blast[] the commission?s suggestions, saying it would force middle-class homeowners to subsidize tax breaks for the wealthy"? I guess there are a lot of "middle class" people in the top third of taxpayers.

It's a complex policy question, and since there are other, offsetting tax breaks, it's hard to see who will be hurt the most. But generally, isn't it fairer to have lower tax rates than a bunch of deductions? With deductions, they only help if they're more than the standard deduction and if you do the thing the government has decided to favor.

Wouldn't it be better if you made housing decisions ? rent or buy, big or small ? without the government adding weight to one side? But if you've already bought a house, and the government's encouragement factored into your decision, you might feel cheated if they take that deduction away. Of course, the government always had the power to take the deduction away, and there's always the argument that you should have factored that in when you made your decision.

But that argument is going to piss people off unless they can remain calm long enough to see that a lowering of the tax rates more than offsets the bottom-line value of their deduction. But is that true? Does anyone know?

Full post as published by Althouse on November 13, 2010 (boomark / email).