I had heard that the mortgage deduction was designed to incentivize the population to settle down. A population that is settled is more invested in the community, less likely to cause trouble, and more likely to pay taxes. Although, in today's workforce, lack of mobility can be a liability.
> the deduction began as an unplanned technicality. When the federal government first levied income taxes in 1913, Congress allowed Americans to deduct from their taxes the cost of all interest payments. This is standard policy for corporations: the government only wants to tax profits—not money spent on loans for tractors or a new office. In 1913, the government allowed deductions on all interest—probably because all interest payments were business-related. No one took out car loans in 1913 or paid interest on credit card debt, and the majority of mortgages were for farms.
Most of the benefit goes to the wealthy (at least, the portion of the population with the highest incomes; I'm not interested in arguing about whether households earning $200,000+ in high expense areas are wealthy or not).
For someone earning $500,000 a year, a $5,000 tax break is a $5,000 tax break, it isn't going to do much of anything to their behavior.
Considering that mortgages usually require a down payment, you could also make the argument that the benefit overwhelmingly accrues to the financially stable. People that can't get the down payment together aren't going to be stabilized by a benefit they can't access.
This is 100% a digression, but personally, I'm a fan of using "high-income" as a term in place of wealthy. I understand wealth to be having lots of assets: having a high income can cause you to be wealthy, but you can also be wealthy without currently having a high income.
I'm very sensitive to this at the moment, because "wealthy" is used as a term when people talk about CA income taxes, which can be frustrating since in reality, much of the wealth in California is enormously under taxed (thanks to Prop 13), which basically amounts to the continuing siphoning of wealth from the young to the old.
Just got my tax bill and I see I'm paying a percentage of my home value for things like school districts, etc.
Why I as a relatively new resident who has not benefited from these services yet is paying a disproportionate percentage of the taxes by a massive amount compared to people who have benefited from these services for decades while paying a pittance due to their locked prop 13 tax rates is beyond infuriating.
Doubly so when those long time owners have captured absolutely massive value through collecting rents and massive asset appreciation.
I'm all for paying my fair share for services in my community. This is not my fair share. At the very least it should be equal if not based on how long people have lived there.
