From BusinessWeek contributing economics editor Chris Farrell:
Housing: Time to Halt Taxpayer Subsidies
"What's more, the mortgage interest deduction is simply bad tax policy. It's sold as a middle-class subsidy, but since the value of the deduction goes up with the size of the mortgage, the biggest break is enjoyed by the highest-income households. For instance, the President's 2005 Advisory Panel on Federal Tax Reform calculated that individuals making more than $200,000 a year received more than eight times the benefit of those earning between $50,000 and $75,000 a year.
These days, no one can doubt that a home is an investment. It's an asset class, like stocks and bonds. Indeed, one reason why housing prices hit such stratospheric heights was the potent combination of owners treating homes as an investment, and the capital markets shoveling huge sums of money into real estate through such innovations as collateralized debt obligations (CDOs). For awhile, the net effect was to increase the liquidity of real estate "investments," supporting an unprecedented degree of speculation.
The tax code shouldn't bias investment money to favor one kind of investment over another—certainly not in an intensely competitive global economy".