Yes, this is a form of middle-class welfare that hinges on the intellectually troubled notion that home ownership is a net benefit to everyone, makes for higher aggregate property values and therefore a benefit to all, when it’s clear by now that there are a lot of social consequences including sprawl, isolation, the very neighborhood blight it was supposed to fix, and so on.
But it’s not that simple. Families don’t think like economists or budget wonks. Conversely, any time you hear the government being urged to think like families, run. Families think mostly in terms of what their monthly mortgage payment will be first. Knowing that you get to deduct a big part of your biggest expense every month means you can usually pay a little bit more for a house than you could for a rental. That means you can buy more house. That means there is more demand and prices stay higher…
…and that means that there is more property tax revenue for states and local governments. Anyone who hasn’t been trapped in ice for the last 5 years knows these are the very entities that are in the most danger from The Great Recession. They also directly provide many of the services that people who vote use on a day to day basis. Schools. Fire. Police. Roads. And I don’t think replacing the revenue this will cost them with block grants is going to make anyone feel better. Block grants can be taken away.
So, either show me that this won’t be a problem or tell me how you’re going to replace the revenue. Or else stop it with this talk—which is, as all of the same wonks recognize, politically futile anyway. But it’s also even lacks the justification of being smart policy if it’s going to gank local government.