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Carried Interest Tax Hike a Threat to Multifamily Housing
Proposals to increase the tax on capital gain that is earned as part of a carried interest would have a particularly damaging impact on multifamily housing and would result in lost jobs and reduced property tax revenues for state and local governments, according to recent analysis by economists at NAHB.
Legislation passed by the House in December — H.R. 4213, the Tax Extenders Act of 2009 — would make carried interest paid as a capital gain subject to ordinary income tax rates of up to 35%, up sharply from the current rate of 15%.
NAHB has consistently opposed changing the taxation of carried interest, pointing out that it would impose a multi-billion dollar tax increase on real estate at a time when the industry is struggling to emerge from the worst downturn in decades.
“Among other impacts, this change would generate a 133% tax increase on carried interest income, thereby impeding the financing of future multifamily developments and undermining the underwriting of established deals,” Robert Dietz, NAHB’s assistant vice president for tax and policy issues, writes in his economic analysis of the impact of increasing the tax on carried interest.
“These effects would result in lost jobs and economic benefits from future development, as well as foregone property tax revenues for state and local governments.”
The NAHB study found that increasing the tax rate would reduce state and local property tax collections by $1.2 billion per year nationwide. Approximately $240 million of that loss would come from multifamily properties.
On the employment front, where soaring levels of joblessness continue to erode consumer confidence and cast doubts about the strength of the economic and housing recoveries now getting underway, the tax increase would result in 18,000 lost jobs in 2010 and 33,000 more in 2011 as the result of lower levels of multifamily construction.
The Senate, which has yet to consider a tax extender bill, has in the past rejected the proposal to increase the tax rate on carried interest.
To read H.R. 4213, click here and enter the bill number in the box at the upper center of the page.
For more information on the legislation, e-mail Greg Brown at NAHB, or call him at 800-368-5242 x8421.
For more information on the economic analysis, e-mail Rob Dietz, or call him at 800-368-5242 x8285.
 Web Site Is One-Stop Shop for Tax Credit Info
Builders and other industry professionals can help spur home sales by referring prospective home buyers to www.federalhousingtaxcredit.com. The NAHB Web site provides detailed information on both the extended $8,000 first-time home buyer tax credit and the new $6,500 repeat buyer tax credit recently signed into law by President Obama.
Consumers can use the Web site to find information on both tax credits — including frequently asked questions and links to social media sites that provide updated information as it becomes available. It also includes a number of home-buying resources for consumers.
Industry professionals are encouraged to highlight the tax credit Web site when marketing to their potential home buyer market.
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