A little dated to say the least, but a pretty interesting piece if you have the time:
http://www.nytimes.com/2006/03/05/magazine/305deduction.1.html?_r=1&pagewanted=printA few interesting highlights for those not inclined to read the entire article:
1. First modern income tax was created in 1894 although the Supreme Court quickly ruled it unconstitutional
2. Constitution was amended in 1913 and a new income tax was enacted - all interest expense was deductible
3. All interest (including interest on credit card debt) was deductible until 1986
4. Homeownership jumped from the mid 40% range in the first half of the century to the low 60% range by 1960 - most likely impacted much more by the availability of mortgages due to the creation of the Federal Housing Administration than due to the mortgage interest deduction
5. Home ownership in the US is roughly the same as it is in Canada, Australia and England where mortgage interest is not deductible
6. Just over 2/3 of all taxpayers, including most renters, don't itemize deductions so the mortgage deduction would have no benefit
Unquestionably the mortgage interest deduction favors wealthier Americans.
The real quesiton is whether or not our current tax system is fair. A few questions:
1. Is it fair that the top 10% of income earners who represent 46% of total AGI pay 70% of total income taxes?
2. Is it fair that the bottom 50% of income earners who represent 13% of total AGI pay 3% of total income taxes?
Your answers to the above two questions probably impacts your view of the Mortgage Interest Deduction debate.
How scary is this:
2010 projected total tax receipts $2,162 billion
2010 project expenditures
Defense $667
Social Security $696
Medicare $450
Medicaid $273
Net interest on debt $228
Total $2,314 billion
Not much room for anything else. Forget unemployment benefits, forget all of your departments, forget everything.