"after all your calculation, 'could easily be billions' seems like a number pulled from the air"

Not really.

From: http://money.cnn.com/2017/11/03/real_estate/mortgage-interest-deduction-cap-tax-bill

"So far this year, 5.4% of all loans originated were more than $500,000, ... or about 325,000 loans"

That's "so far this year". If we extrapolate to the full year, that's 390,000 loans per year more than $500k (presuming Nov-Dec are comparable to Jan-Oct).

If the loan amount averages just $550k, at 4% 30-year fixed, and in the 25% tax bracket, each such loan generates a total of $1,252 in additional tax revenue due to non-deductible interest.

With 390,000 new loans per year, that's $488 million in new tax revenue each year. We pass the $1B mark in 25 months.

I don't know if that $550k number is accurate. Since we're talking about ALL loans that start out higher than $500k, I'm guessing the actual number is somewhat higher.

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