Yes, I do believe that tax cuts do help to increase home ownership, and home owners do spend a lot of money for upkeep and home improvements, sparking local economies.
Then my question to you still pertains. What is the intent behind deducting state taxes? I doubt it is to encourage high state taxes to go even higher, but it has that effect. If the purpose is to put money back into the taxpayer's pocket, then skip the middle man and don't take the money from the taxpayer in the first place.
I covered the benefit of freeing up money for to spark economic growth.
To prevent double taxation.