Waldman writes that the "mortgage interest deduction came about essentially by accident," because when "the Constitution was amended in 1913 to allow for an income tax, Congress made all interest payments deductible." He points out that it makes little economic sense and that it mostly benefits the wealthy:
As a homeowner, I love the mortgage interest deduction. Every year when I'm doing my taxes and I get to the step in the software where you enter in your mortgage interest, a wave of relief just washes over me, just as it surely does to millions of others. But I can't come up with any good argument to defend it. And there's the dilemma for lawmakers. They can make the case that eliminating (or scaling back) the deduction is good for the country's finances, but it's going to be hard for that case to be heard when taxpayers are screaming, "You're going to increase my taxes by how much?!?!" at them.
So I'd wager that if the deduction gets touched at all in these debates, it will be by putting some kind of cap on the amount of interest one can deduct. But that cap will be placed high enough—$20,000 of interest, say, or what you'd pay on a $400,000 loan at 5 percent—that very few homeowners would actually feel it.