Mortgage interest tax deduction back in the cross-hairs as deficit soars

Historically, buying a home has been advantageous for both owners and the country at large. Long considered the engine that drives the American economy, home ownership brings huge rewards to banks, mortgage companies and builders, and the building industry provides tons of jobs.

Home ownership also has benefited the regular guy since 1913, when owners first were allowed to deduct the interest on their mortgages from their income taxes.

As the country seeks new ways to wrangle the escalating national deficit, however, the mortgage-interest tax deduction has come into the target sights of economists, some of whom see it as a huge drain on the federal Treasury. As it has in times past, the notion of ending that tax break has whipped up a frenzy among the parties most invested in such a proposal.

Thomas Hoenig, president of the Federal Reserve of Kansas City, floated the idea -- often referred to as a "third rail" topic among homeowners, real estate agents and politicians -- at the annual National Assn. of Realtors confab in New Orleans on Friday. The man was lucky to have escaped with his head on.