Critics of the flat tax charge that eliminating the home mortgage interest deduction in exchange for a low flat rate tax would reduce the value of owner-occupied housing, the single largest asset of most American households. Critics further contend that the loss of this tax benefit will also reduce the incentive to buy a home, a cornerstone of the American dream.
The critics are wrong. Home ownership in the United states stands at about 67 percent of the population. In comparison, the rate of ownership in the United Kingdom and Australia is about 69 percent and 67 percent in Canada. Yet, mortgage interest is not deductible in any of these three countries.