wait, what? There's a $250k capital gains exemption for sale of primary home lived in 2 of past 5 years, so isn't capital gain basically irrelevant to anyone but very wealthy? Do you know something I don't? (reasonably likely)
Yeah, mortgage tax deduction, like all incentives that encourage borrowing more money, ends up being a transfer of wealth from new homebuyers to whoever had owned property outright (whether older long-term homeowners or developers or real estate investors).
Very important point.