the problem with that analysis is that the wealthy can structure their assets to avoid taxation using these methods (look no futher then Theresa Heinz Kerry) - while some "regular guy" earning wages on a W2 cannot. the original intent of the law was to thwart that type of structuring done by the wealthy to avoid taxation. we need not offer a "bounty" to the rich to buy homes and buy muni-bonds.
I disagree. We do need to motivate the rich to buy munis. Otherwise, municipalities would have to offer much higher rates, and they would have less money for projects.