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So when you close a mortgage the points are taxed to the mortagage company that earns them.

Which would constitute an income tax rather than a consumption tax. All that happens is such a case is points are increased to make up the difference, the person paying the loan still pays for the tax. Keep it in the open and in the view of the electorate, purely a tax on consumption, a allow an exception to the rule.

If you want to be rid of the 16th amendment, taxing interest income is not the way to go. It is consequence of Congress' desire to tax interest income and stock dividends that the 16th amendment even exists.

The 16th amendment was designed to overturn the ruling of Pollock v. Farmers which declared the taxation of income from personal and real property to be a direct tax to be apportioned.

POLLOCK v. FARMERS' LOAN & TRUST CO., 158 U.S. 601 (1895):

"We have considered the act only in respect of the tax on income derived from real estate, and from invested personal property, and have not commented on so much of it as bears on gains or profits from business, privileges, or employments, in view of the instances in which taxation on business, privileges, or employments has assumed the guise of an excise tax and been sustained as such."

"If that[rents from land] be stricken out, and also the income from all invested personal property, bonds, stocks, investments of all kinds, it is obvious that by a r the largest part of the anticipated revenue would be eliminated, and this would leave the burden of the tax to be borne by professions, trades, employments, or vocations; and in that way what was intended as a tax on capital would remain, in substance, a tax on occupations and labor. We cannot believe that such was the intention of congress."

"We do not mean to say that an act laying by apportionment a direct tax on all real estate and personal property, or the income thereof, might not also lay excise taxes on business, privileges, employments, and vocations. "

Our conclusions may therefore be summed up as follows:
First. We adhere to the opinion already announced,-that, taxes on real estate being indisputably direct taxes, taxes on the rents or income of real estate are equally direct taxes.
Second. We are of opinion that taxes on personal property, or on the income of personal property, are likewise direct taxes.
Third. The tax imposed by sections 27 to 37, inclusive, of the act of 1894, so far as it falls on the income of real estate, and of personal property, being a direct tax, within the meaning of the constitution, and therefore unconstitutional and void, because not apportioned according to representation, all those sections, constituting one entire scheme of taxation, are necessarily invalid.