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The President's proposal to eliminate double taxation of corporate earnings was replaced by a reduction in ordinary long-term capital gains tax rates that will also apply to dividend income.
This provision creates a new incentive for corporations to invest in the Low Income Housing Tax Credit.
Because the provision to reduce tax rates on dividend income is calculated strictly at the shareholder level, purchasing tax credits increases corporate earnings that can be used to distribute more dividends. The increased dividends are then taxed at the reduced capital gains tax rates, which are substantially lower than the ordinary income tax rates that apply to dividends today.
NAHB played a pivotal role in shaping the tax cut agreement throughout a negotiating process that lasted for months.
The association worked with the White House, Treasury Secretary John Snow, Commerce Secretary Donald Evans, Chairmen Grassley and Thomas and bipartisan congressional leaders to ensure that the final tax package produced the best possible bill for the entire housing sector.
“As the congressional debate on the Administration’s tax plan unfolded,” said Howard, “NAHB remained a voice of reason to calm fears that the President’s proposal to eliminate the double taxation of corporate dividends would harm the Low Income Housing Tax Credit program."
NAHB testified before Congress in support of the Administration’s economic growth package and offered several solutions to mitigate any unintended effects of the President’s dividend proposal on the tax credit.
In its meetings with Secretary Snow and his top aides to discuss these proposals, NAHB presented economic data to help the Treasury Department craft a good solution on this issue.
“Since the beginning of the year when President Bush first unveiled his tax plan, NAHB was the only housing organization that had a seat at the table in the ongoing discussions between the Administration and Congress on an economic growth package,” said Howard.
“As an organization that represents all segments of the housing industry, I am particularly proud of the role that NAHB played on behalf of the housing community,” he said.
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