Gross is right to target the home mortgage-interest deduction (HMID), the largest federal subsidy for housing, totaling somewhere in the region of $76 billion in "tax expenditures" per year. By contrast, the amount allocated for Low Income Housing Tax Credits (LIHTC) is around $1.4 billion.

Some economists estimate the HMID to inflate pre-tax home prices by as much as 20%.

Still, scaling back the deduction limit from $1 million to $200,000 would only further disadvantage taxpayers in high-cost housing states such as New York, New Jersey, and California. To take Los Angeles as an example, the median home price far exceeds the limit proposed by Gross. It is not uncommon for a modest tract home to go for north of $1 million. Homeownership would be even more unaffordable in urban areas, even after the market price corrects itself in a hypothetical post-MID fiscal environment.