There are three "keystone deductions" in the IRS code that matter more than all others to Americans who itemize deductions.
They are keystone deductions because they help the middle and upper middle class and they promote extraordinarily important social policies which have long been at the center of the traditional values held by most Americans.
The first is the deduction for contributions to qualified charities, such as hospitals, high schools and colleges, charities serving everyone from children to the homless to the old and infirm, and of course churches of every denomination.
The second keystone deduction allows homeowners with mortgages to deduct the interest on that mortgage from their income before calculating the ta they owe. This deduction encourages people to buy houses and is in fact a key component of the value of every house in America. The deduction is a valuable part of every home. If it is ended or limited, the value of every house in America falls, even if that home has no mortgage on it. The same downward pressure on home values occurs even if the deduction is only limited for some houses or some owners --say second houses or homes costing more than $500,000. The housing market doesn't distinguish between who owns what, but cares mostly about what buyers are willing to pay, and a lower or eliminated deduction means fewer buyers which means falling house values.
The third deduction allows taxpayers to deduct from their income before calculating their federal tax all the state and local taxes they paid in the previous year. Americans in high tax states, already staggering along under punitive tax regimes, would be smashed by any limit on this deduction. Some would call such a move a last straw, and leave the already reeling states like California, but most would simply be trapped where their jobs and (suddenly less valuable) homes are, paying higher and higher taxes.
Thus a Pennsylvania family of six with two kids in college, with a mortgage that has been refinanced to help pay tuition, but which still makes a tithe to their church is looking at a triple whammy tax hike if these deductions go away or are limited. So would millions of other Americans.
Which is why reaction ranged from shock to anger when two Republicans on the so-called Supercommittee proposed attacking those very deductions this week. Pennsylvania's Senator Pat Toomey and Texas Congressman Jeb Hensarling, both credentialed conservatives, stunned their center-right supporters and Republicans across the country by proposing a plan to raise hundreds of millions of dollars of new revenues financed by the assault on these keystone deductions.