NAR, HGAR Say Tax Reform Plan Would Have Chilling Effect on Homeownership, Home Values
John Jordan | September 28, 2017
WASHINGTON— The “Big 6” tax reform proposal if enacted, could lead to a tax on homeownership for millions, according to the National Association of Realtors.
President Donald Trump and Congressional Republican leadership, dubbed the “Big 6,” released its framework for tax reform on Sept. 27th that calls for changes to the current tax code that would eliminate important provisions, such as the state and local tax deduction, while nearly doubling the standard deduction and eliminating personal and dependency exemptions. The National Association of Realtors believes the result would all but nullify the incentive to purchase a home for most, amounting to a de facto tax increase on homeowners, putting home values across the country at risk and ensuring that only the top 5% of Americans have the opportunity to benefit from the mortgage interest deduction.
NAR President William E. Brown, a second-generation Realtor from Alamo, CA and founder of Investment Properties said that the proposal reaffirms Realtors’ concerns from earlier in the year and urged lawmakers to keep homeowners in mind as they proceed with comprehensive tax reform with the following statement:
“We have always said that tax reform—a worthy endeavor—should first do no harm to homeowners. The tax framework released by the Big 6 today missed that goal. This proposal recommends a backdoor elimination of the mortgage interest deduction for all but the top 5% who would still itemize their deductions.”
He added that when combined with the elimination of the state and local tax deduction, these efforts represent a tax increase on millions of middle-class homeowners. That tax increase flies in the face of a reform effort ostensibly aimed at lowering the tax burden for Americans. At the same time, the lost incentive to purchase a home could cause home values to fall. Plummeting home values are a poor housewarming gift for recent homebuyers and a tremendous blow to older Americans who depend on their home to provide a nest egg for retirement.”
HGAR Chief Executive Officer Richard Haggerty says of the Big 6 tax reform proposal, “As NAR President William Brown has said, any tax reform plan should have at its core, do no harm to homeowners. Unfortunately that is not the case with this current tax proposal. I believe the possible elimination of the state and local tax deduction would have an immediate and dramatic chilling effect on property values and homeownership in New York.”
New York Gov. Andrew Cuomo came out swinging against the Big 6 tax reform plan, calling it the “height of hypocrisy.” The governor said, “You have an administration that wants to cut taxes, and now they literally want to tax you on the taxes you pay. I believe it’s unconstitutional. I believe it’s illegal and I would challenge it as double taxation.”
Gov. Cuomo criticized the Congressional Republicans for proposing health care reform bill Graham-Cassidy, cuts to the Medicaid DSH program and the tax reform plan, which he said would be, if enacted, “highly damaging and devastating” to New York State.
NAR Brown said that moving forward, “Congress can still score a win for American families by promoting lower rates and comprehensive reform that doesn’t single out homeowners for a tax hike, while also preserving important investment incentives like 1031 like-kind exchanges. We look forward to continuing the discussion in the weeks and months ahead.”
Highlights of the Big 6 Tax Reform Plan
Lowers Rates for Individuals and Families—The framework shrinks the current seven tax brackets into three—12%, 25% and 35%—with the potential for an additional top rate for the highest-income taxpayers to ensure that the wealthy do not contribute a lower share of taxes paid than they do today.
Doubles the Standard Deduction and Enhances the Child Tax Credit—The proposal roughly doubles the standard deduction so that typical middle-class families will keep more of their paycheck. It also significantly increases the Child Tax Credit.
Eliminates Loopholes for the Wealthy, Protects Bedrock Provisions for Middle Class—Eliminates many itemized deductions that are primarily used by the wealthy, but retains tax incentives for home mortgage interest and charitable contributions, as well as tax incentives for work, higher education, and retirement security.
Repeals the Death Tax and Alternative Minimum Tax (AMT)—The plan repeals the Death Tax and substantially simplifies the tax code by repealing the existing individual AMT, which requires taxpayers to do their taxes twice.
Creates a New Lower Tax Rate and Structure for Small Businesses—The framework limits the maximum tax rate for small and family-owned businesses to 25%—significantly lower than the top rate that these businesses pay today.
To Create Jobs and Promote Competitiveness, Lowers the Corporate Tax Rate—So that America can compete on level playing field, the framework reduces the corporate tax rate to 20% – below the 22.5% average of the industrialized world.
To Boost the Economy, Allows “Expensing” of Capital Investments—The framework allows, for at least five years, businesses to immediately write off (or “expense”) the cost of new investments, giving a much-needed lift to the economy.
Moves to an American Model for Competitiveness—The framework ends the incentive to offshore jobs and keep foreign profits overseas. It levels the playing field for American companies and workers.
Brings Profits Back Home—The framework brings home profits by imposing a one-time, low tax rate on wealth that has already accumulated overseas so there is no tax incentive to keeping the money offshore.