C.A.R. and NAR are opposing the “Big Six” Congressional Tax Reform proposal that will soon be considered by Congress, because it removes incentives for homeownership from the tax code and raises taxes on middle-class homeowners.
“These incentives are critical for a strong housing market that creates jobs and builds stable communities,” said the NAR in an email to members. “Do not let tax reform become a tax increase for middle class homeowners.”
In a recent statement, C.A.R. President Geoff McIntosh said the tax reform proposal, “will eliminate the incentive for people to buy homes, shrink the middle class, and raise taxes on hundreds of thousands of California homeowners. The doubling of the standard deduction, coupled with the elimination of state and local tax deductions, such as property taxes, will adversely impact California and its housing market.”
Homeownership is considered “the bedrock” of the real estate industry and “we need to make sure any tax reform legislation protects middle class homeowners.”
- Did you know that American homeowners already pay 83% of all federal income taxes?
- Did you know that some of the tax reforms under discussion could result in a drop of more than 10% in home values?
- Did you know that after the 1986 Tax Reform Act property values in the commercial sector dropped significantly, negatively impacting state and local tax revenue?
- Did you know that home-owning families with incomes from $50,000 to $200,000 could face average tax hikes of $815 in the year after enactment?
Both encourage REALTORS® to “Tell Congress – Do not raise taxes on middle class homeowners in order to cut taxes for corporations.”
Richard Green, director and chair of USC’s Lusk Center for Real Estate, said in a CNBC interview: “It does absolutely encourage people to buy bigger houses than they would, but does it flip the switch between buying and renting? Maybe half a percent in homeownership, very little”–accept in states such as California.
Green notes that the deduction is most important in states such as California, which has both high tax rates and high home prices. Home prices here, he said, could drop without the deduction. As for overall homeownership, he points to other nations like Canada and Australia, which have no mortgage deduction but have very high homeownership rates.
“This proposal recommends a backdoor elimination of the mortgage interest deduction for all but the top 5% who would still itemize their deductions,” wrote NAR President William Brown in a release. “When combined with the elimination of the state and local tax deduction, these efforts represent a tax increase on millions of middle-class homeowners.”
Gary Cohn, President Trump’s chief economic advisor, commented that, “People don’t buy homes because of the mortgage deduction.”
Brown countered that “There’s a reason our nation has incentivized homeownership in the tax code for over a century. It works, and helps make home ownership more affordable for middle-class families who might not otherwise be able to close the deal, while setting them on track for a strong financial future.”