But they both distort the market. Health insurance especially. They add not only a “fourth party” for insurance payments, but a third party on incidental and routine healthcare incentives. By encouraging people to fit every last healthcare expense under the tax exemption, they take a lot of price discovery and market incentives from the smallest of health expenditures. In sum, they jack up costs and remove cost-containing free market price mechanisms.
Mortgage deductions are a bad idea, too—but not as destructive.
all deductions are unnecessary if taxes are based on something other than income ...