GOP, housing industry battle over proposed tax reform plan

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The special interest onslaught against the GOP’s tax plan has begun, with the nation’s housing industry lobbying feverishly for Republicans to scrap their plans to expand the standard deduction or at least to soften the potential blow they say is on the horizon for homeowners.

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Realtors and home builders say that a bigger standard deduction — the crux of the GOP’s efforts to cut taxes for the middle class — will be so attractive that people will use it and forgo the mortgage interest deduction, which the housing industry fears will cut into its business.

It’s just one of the tax policies that are spurring trench warfare on Capitol Hill, where thousands of lobbyists are working on behalf of the country’s biggest industries to preserve their piece of the pie.

The real estate fight pits the housing industry against the deep-pocketed Koch political network, which is accusing groups, like the National Association of Realtors, of jeopardizing broader tax reform efforts with their position on the standard deduction.

“If lawmakers cave to this pressure and start picking certain preferences to keep, it could jeopardize the entire effort — and everyone would lose,” the pro-free market group Freedom Partners, part of the Koch network, says as part of a new ad campaign this week.

Realtors say they support the broader goals of tax reform if they can be achieved in a “fiscally responsible” manner, said National Association of Realtors President William E. Brown.

But Mr. Brown said they want to protect the tax code’s current incentives that promote home buying, saying that prices will drop otherwise, which he said would amount to an effective tax increase on middle-class homeowners.

“We will continue to make the case that tax reform should first do no harm,” Mr. Brown said.

The trade-off comes in the way the real estate industry expects the tax reform to play out. Republicans say by doubling the standard deduction, from about $6,000 to $12,000 for individuals and $24,000 for married couples, they will deliver a tax cut to low- and middle-income individuals.

But if more people take the standard deduction, fewer people would itemize, meaning they won’t claim special breaks such as for mortgage interest, charitable contributions or business expenses.

About 30 percent of taxpayers currently itemize.

The National Association of Home Builders said it supports the GOP’s tax efforts but wants to find a way to ensure incentives for home buying. One option would be to convert the mortgage interest deduction into a new tax credit, said James Tobin, the group’s chief lobbyist.

“I’m dismayed that they would label NAHB that way,” Mr. Tobin said of the ad campaign. “I think that if they talked to anybody on Capitol Hill and certainly anybody over here, they’d find that we’re doing some of the heaviest lifting to try to find a path forward for tax reform this year.”

Scott Olson, executive director of the Community Home Lenders Association, likewise said Thursday the group is not opposed to tax reform overall, but wants to make sure homeowners are protected.

“Yes, CHLA is defending the mortgage interest deduction and its positive impact on homeownership and home prices,” Mr. Olson said in an email. “But no, CHLA is not opposing either tax reform or the increase of the standard deduction.”

House Speaker Paul D. Ryan on Thursday said special interests will fight to protect their specific provisions in the code, and called on conservatives to defend the outlines of the GOP’s current plan.

“An army of lobbyists will come to protect special interest provisions and to derail tax reform. When it does, we must be able to count on the foot soldiers of the conservative movement to see this through,” Mr. Ryan said in a speech at the Heritage Foundation, a conservative think tank.

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