GATEWAY PERSPECTIVES: A Dangerous Game of Chess
Richard Haggerty | November 19, 2017
At this juncture you may be sick and tired of hearing about tax reform and how the current proposals from the Senate and the House will impact the housing market. Goodness knows it can seem like some type of board game the way the Congressional budget negotiators keep tweaking and modifying the various pieces of the proposed legislation. However, one thing is clear, the current proposals continue to negatively impact homeownership, and in a very big way.
The health of the economy and the housing market is not some game, and Congress needs to stop treating the deductions that benefit homeowners as though they are chess pieces. The current House GOP plan reduces the mortgage interest deduction by half to $500,000, caps the deductibility of property taxes at $10,000, and eliminates the deductibility of state and local taxes. The current Senate GOP plan leaves the mortgage interest deduction intact, but eliminates the state and local tax deduction, including the property tax deduction. Both plans in their current form will have a devastating effect on the housing market in New York State.
So, who benefits if this deeply flawed tax reform plan is enacted in its current form? You could make the argument that renters will benefit, as the current plan calls for an increase in the standard deduction from $12,000 to $24,000. However, according to Lawrence Yun, National Association of Realtors’ chief economist, over the long haul, renters do not accumulate wealth. Lawrence advises that Federal Reserve data indicates that the typical wealth of a renting household has decreased from $5,900 to $5,100 since 2010, while households who own homes experienced an increase in their wealth from $192,800 to $231,400 since 2010.
On Monday, Nov. 13th, Congresswoman Nita Lowey hosted a press conference at the HGAR headquarters in White Plains. At the press conference Congresswoman Lowey, joined by HGAR President Dorothy Botsoe and President-elect Barry Kramer, discussed the onerous effects of the current tax reform proposal on residents in the lower Hudson Valley. In addition to the portions of the proposal that negatively affect housing, the tax reform package would eliminate the deduction for moving expenses, the deduction on interest on student loans, and the deduction for medical expenses, even for the elderly. The cherry on the top of the elimination of all of these current deductions is that the tax reform proposal will add $1.5 trillion in new federal debt.
I’m very pleased to advise that all of the Congressional leaders who represent the geography of HGAR are firmly opposed to the tax reform package as currently proposed. As Congresswoman Lowey stated at the November 13th press conference, meaningful tax reform should be a bi-partisan effort that doesn’t end up hurting American homeownership. The tax reform process shouldn’t be a game of chess, but rather a meaningful and thorough discussion on how to improve the system that will benefit all stakeholders and not stick our kids and grandkids with a $1.5-trillion price tag.