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Health of Home Building Industry Key to Our Economy
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By
Sen. Kay Bailey Hutchison
(R-Texas) |
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| As home sales and asset prices have declined across the country, many home builders are operating at a financial loss and, without help, some will collapse within the year. We cannot accept that result because the economic ramifications would be severe.
In Congress, we are closely monitoring the economy and considering a prescription for our economic ills. We need to be careful that the economic medicine that we prescribe does not make things worse. The Senate is debating legislation that addresses the housing industry and offers aid to home owners. As we consider this legislation, I strongly believe we must extend the ability for home builders to carry back their losses over a greater number of years.
The economic stimulus package passed by Congress earlier this year did not address the home building industry with bonus depreciation or small business expensing provisions.
While home builders can carry forward their losses, this allowance will not provide immediate assistance during the current difficult period. Additionally, present law only allows business losses to be deducted from taxes paid from the previous two years.
This combination provides little relief for struggling home builders and is perilous not only for this industry, but also for our national economy.
We should provide incentives for investment and encourage business decisions that will strengthen the economy.
Without this prudent accounting change in the timing of tax assistance, home builders will feel pressure to sell properties in an already oversaturated market to generate revenue to offset losses on their balance sheets. This can cause the value of every home in the area to plummet, causing a ripple effect in the economy.
Passing a net operating loss carry-back provision would provide immediate relief for companies as a rebate on taxes paid in previous years and provide needed access to cash in a down period, which will spur growth.
Further, the benefit to claim these losses is already allowed on a carry forward basis. Changing the timing of this benefit to help home builders at a time when they need it most is sound tax policy, and one I strongly endorse.
Kay Bailey Hutchison is the chairman of the Republican Policy Committee and the senior senator from Texas.
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