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Lawmakers Just Say ‘No’ to Anti-Housing Tax Proposals
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Sen. Max Baucus (D-Mont.), right, with NAHB President David Pressly | Two members of the House and Senate tax-writing committees on May 9 told the NAHB Executive Board that they would oppose any attempts by lawmakers to reduce or eliminate the mortgage interest deduction and other housing tax incentives as part of any tax overhaul plan or to help ease the federal deficit.
“Tax reform is dead for this year, but it could come up next year,” said Sen. Max Baucus (D-Mont.), the top Democrat on the Senate Finance Committee.
Reporting that Congress was considering a $70 billion tax cut package that would increase the national debt, Baucus said, “many people think we are near a tipping point” where growing deficits could threaten the nation’s long-term economic health.
(Later that day, House and Senate GOP leaders reached an agreement on the tax cut measure that would provide a two-year extension of the reduced 15% tax rate for capital gains and dividends that are currently set to expire in 2008. The legislation would also provide a one-year “patch” that would allow about 15 million taxpayers to escape the alternative minimum tax, a parallel tax system originally designed for the wealthy but that is now ensnaring more middle-class Americans because it was never indexed for inflation. (For a related story in this issue of NBN, click here.)
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Treasury Secretary John Snow |
Treasury Secretary John Snow, who also addressed the Executive Board, said that tax cuts enacted by the Bush Administration have stimulated economic growth and job creation, and that the best way to manage the nation’s burgeoning red ink is to reduce federal spending.
“The problem with the deficit is not that we are under-taxed, it’s because we spend too much,” said Snow.
With a permanent fix for the alternative minimum tax expected to cost about $700 billion and concerned that housing could represent a tempting target for Congress to address deficit worries, NAHB First Vice President Brian Catalde asked Baucus if he would support eliminating the mortgage interest deduction.
“I oppose that,” said Baucus.
“State and local tax deductions?” asked Catalde.
“I oppose that, too,” Baucus said, adding that he favors keeping the current deductions for second homes and home equity loans and is a strong supporter of the Low Income Housing Tax Credit.
Pressed even further by New Jersey builder Michael Fink, who asked the senator if he would support limiting any deductions that relate to homeownership, Baucus said: “I’m very skeptical of further limits. For most Americans, that doesn’t seem quite right.”
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Rep. Tom Reynolds (R-N.Y.) |
Rep. Tom Reynolds (R-N.Y.), a member of the House Ways and Means Committee, was even more emphatic in expressing his support for housing tax incentives.
Recalling a past discussion with Secretary Snow on the issue of tax reform, Reynolds told the NAHB leadership: “I said, ‘over my dead body’ will we lose the mortgage interest deduction or real estate property tax deduction.”
Like Baucus, Reynolds also voiced strong support for maintaining existing housing tax provisions on second homes, the Low Income Housing Tax Credit and home equity loans.
In December, the President’s Advisory Panel on Federal Tax Reform presented recommendations to the Treasury Department that would do away with all of the current housing tax incentives and replace the mortgage interest deduction with a much more limited 15% tax credit.
The tax panel’s proposals represent a radical departure from America’s decades-long commitment to federal tax polices that promote homeownership and the production of affordable rental housing. Neither Treasury Secretary Snow nor President Bush is under any obligation to follow the panel’s recommendations.
“One of the risks in tax reform is unintended consequences,” said Snow. “We must make sure we understand its implications. We want tax reform but not anything that harms homeownership. Before we send any tax proposals to the President, we will look at all the recommendations in the panel’s report. It’s a starting place, not a finishing point.”
Stating that there are four times as many tax preparers in the U.S. as there are firefighters, Snow added that the “heart of reform has to be some form of simplification.”
Looking ahead to the 2006 congressional elections, Reynolds, who also chairs the National Republican Congressional Committee, told builders he is confident that the GOP can retain control of the House, even though the President and Congress are suffering low ratings in the polls.
Noting that the Democrats need to pick up 15 House seats in November to unseat the Republicans, Reynolds said that there are only 35 seats out of 435 that are competitive. For the Democrats to get control of the House, he said that they would need to win every open seat, defend their own tough races and win three-quarters of the contests where GOP incumbents are deemed vulnerable.
Following the famous edict of former House Speaker Tip O’Neill, who said that “all politics is local,” Reynolds said that his game plan for the GOP in 2006 is to focus on the grassroots level.
“We will build our races from the ground up, from seat to seat,” he said. “We want our candidates to understand the top issues in their district.”
For more information, e-mail Michael Strauss at NAHB, or call him at 800-368-5242 x8252.
Photos by Herman Farrer
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