I do see various tax deductions as subsidizies. Mortgage interest deductions benefit both homeowners with a mortgage and the mortgage industry itself. After all, if part of the interest is deductable, then the interest rates can be higher without the borrowers complaining.

In a related example, you can deduct many of the taxes paid to state and local government. Guess who would likely complain the loudest should those deductions be trimmed? I'm guessing it would be those states and localities with the highest tax rates. The deduction allows them to gouge their people harder than they could get away with otherwise.

Until the late 1980s, people could deduct all sorts of interest, including car payments and credit card interest. I'm personally glad they phased those deductions out. They should lower the base tax rates for everyone (preferably a flat rate for everyone) and eliminate almost all deductions. Why should people who can't quite afford a home, especially in the very expensive housing markets in places like LA, San Francisco, and New York City, have to pay higher taxes than someone who can get a mortgage.

Disclaimer: I do itemize my deductions, claiming the taxes I pay and things like charitable contributions. It's perfectly legal and I'd be an idiot not to do so. I also claimed the mortgage interest deduction when I was making house payments. Now that my home is paid for, my taxes are higher than ever.

However, I realized long ago that deductions can be a psychological trap. A deduction only lowers your taxes by the amount of the deduction times your tax rate. If you have $10,000 in deductions and a 33% rate, then you're paying $10K to lower your taxes by $3300. Frankly, I'd rather pay the extra $3300 in taxes (I don't have to be happy about it) and keep the $6700. In the end, it's how much you have left over after all is said and done that counts. That, and the peace of mind that comes from being 100% debt free, which is damned near priceless.