The flat-tax debate has finally brought to the surface the long suppressed public issue of whether the housing mortgage interest deduction -- the oldest of sacred tax cows -- is really good for homeownership, good for the national economy and fair to anyone but the wealthy.

Opponents of the deduction point out:

• The deduction hurts the economy by channeling extra cash into the already swollen real estate sector, at the price of more dynamic, job-generating investments.

• Freed-up capital and likely lower interest rates would stimulate the overall economy and offset most if not all of the decline in the market value of homes.

• If the deduction is so great, how come Canada has about the same homeownership rate as the U.S., without any deduction for mortgage interest?

• The most basic issue is whether the $50 billion-a-year cost to the Treasury is fair for all Americans and really increases homeownership at all.

An analysis of data from Congress' Joint Committee on Taxation found that of the 27.2 million federal income tax returns which claimed the deduction in 1994:

• Some 8.1 million of those returns were filed by families earning less than $50,000 per year, with the other 19.1 million earning more than $50,000.

• The total benefit from the mortgage interest deduction was $6.1 billion for the lower-income group; but it was a staggering $45 billion for the higher-income group.

• In fact, only half of all homeowners itemize their deductions at all, and of those earning $30,000 or less who did itemize in 1994, the mortgage deductions were mostly less than $500.

• By contrast, 71 percent of those earning more than $200,000 claimed the deduction, with an average tax saving of $8,350.

Source: Neal R. Peirce, "Mortgage Tax Breaks: Who Needs 'Em?" National Journal, March 2, 1996.