But, unlike with programs that do provide direct subsidies, most Americans do not think of tax credits as government benefits. Mettler’s data shows that 60 percent of people who claim the mortgage interest deduction say they “have not used a government social program.” The same is true for those who claim tax credits for child and dependent care or the Earned Income Tax Credit, or who pay into a 529 savings program for their children’s education.Reducing income is equivalent to increasing expenses from a balance line point of view. It is true that there is a difference if one presumes that salaries and income streams are a morally just allocation of resources. But that is a very strong assumption that has a number of key issues involved. Is robbing a bank a morally just sources of income? What about managing a pension fund in a way that maximizes fee revenue? Or writing a hit song in a market with limited media outlets?
When you look closely, a lot of sources of income depend partially on a socially agreed upon framework where laws decide what is or is not a just income. So the distribution of resources is no more morally just than the laws themselves. And one rapidly runs into a odd problems if (changeable) laws reflect underlying moral worth.
Now I tend to be pragmatic. Rewarding hard work and the exercise of talent is a really important social goal. So it is good that there is a distribution of income, insofar as it encourages the socially desirable outcome of more resources and a better world for all involved. Things like a stable currency and a court system are needed for a modern society to function.
So the mortgage tax deduction is a government program, as clearly as being mailed a check by the government. It's just a difference in how the accounting is done.