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Everywhere You Look, Someone Wants To Stop MAGA
There is an unexpected group fighting the Republican tax cuts. The thing that bothers me here is that I don’t think the vast majority of Americans buy a home for their family so that they can deduct the property tax that comes along with it.
I moved into a new home in December and I never gave the property tax a second thought as a deduction. I wanted a home, a piece of the American Dream!
Home Builders Group To Fight GOP Tax Plan
The Republican effort to overhaul the tax code suffered a bruising setback over the weekend when a powerful corporate interest group came out against the proposal just days ahead of House leaders’ planned release of the legislation to the public.
President Donald Trump and GOP leaders are casting the measure as a once-in-a-generation rewrite of the federal tax code, one they say will stimulate the economy, create millions of jobs and give voters a reason to stick with their party in next year’s midterm elections. Rep. Kevin Brady, R-Texas, the chairman of the House Ways and Means Committee, is scheduled to reveal the House version of the bill on Wednesday.
So what happened was, they took the National Association of Home Builders CEO aside and explained what they are trying to do, and the dude immediately goes public and starts crying about it.
A discouraging clue emerged for House Republicans on Saturday, when the National Association of Home Builders came out against the bill after Brady informed the group’s chief executive about key details.
“We will do everything we can to defeat this thing,” said Jerry Howard, chief executive officer of the National Association of Home Builders.
But why? Well, he thinks nobody will want a house if they can’t get the federal government to reimburse their property tax.
Howard said home builders like other parts of the tax plan, such as tax cuts for businesses and lower rates for many families. But he feared that other changes could tip the housing industry into a recession. He was particularly concerned about ideas to eliminate the federal deduction for state and local taxes and doubling the standard deduction, which could remove incentives for all but the “very wealthy” to deduct their mortgage interest — and have a chilling effect on homeownership.
If you double my standard deduction so I no longer have to worry about itemizing, then taxes and interest would no longer be a factor in the house I buy, and it might encourage me to buy a new home more often!
I am good friends with a home inspector, and he is turning people down because of the number of houses being sold out there. So is it really possible something like this could “tip the housing industry into a recession?”
Be honest, if you were in the market for a new home and found the right one, would this stop you from buying it?Published in Domestic Policy
Nope, and I’m in the market to buy.
Every one has to live somewhere. If you can afford to buy, who would want to rent. Granted, there are some where renting might be more advantageous. However, if you have a family or are starting one, it is a no brainer.
Plus this has the added advantage to get home owners to rally to put property tax roll backs on the ballot. oh my !
One problem I see is that people have their budgets and finances set up to use this current tax structure. If you remove the structure you will get some that will go bankrupt because their house will cost more and they will not be able to afford it. If you are cool with people losing their homes and being kicked out on the street because you are changing how things work then that is great just own what you are doing.
They can sell. If the taxes keep them from affording the home, then they are over extended anyway. The solution is to sell and get something more affordable. Something the “Jones’s might not approve of.
On the other hand, if it is a Blue city/state and there is nowhere to live that isn’t taxed to pieces. Surely a well to do Blue family will take them in.
Doesn’t it depend on where you live? I haven’t followed NY property taxes lately (and from what I remember the situation has improved) but if memory serves the amounts charged were arbitrary.
Much how it was before Prop 13 here in California (Thank you Howard Jarvis, may your memory be a blessing). My mom was a dyed in the wool Democrat, but she and my dad could have never built the wealth they did without Prop 13 and the limits it imposed upon the state government to raise taxes.
Even with Prop 13, my taxes go up every single year to the absolute max allowed by law and have doubled because the state has decided “fees” don’t count as a “tax”, and they’re just added to the bill.
Point being in the past it would have been impossible to budget your taxes here in Cali and it’s drifting that way again. And it being a deduction makes sense to me, the same way not paying sales tax at the post office makes sense.
That having been said Hugh Hewitt in the past has beat this drum pretty hard, and of late I find that if I go 180-degrees from HH I’m in the right direction.
So I’m not sure. But just know that my property taxes here in Calif are $6,000 per year – and that’s based upon a 15-year old house evaluation.
Rent is brutal where I live, economically worse than home ownership even if the deduction was phased out.
I’m in favor of getting rid of the deduction too.
They can live in the streets also. What the heck, if they are not rich GOP elites then screw them. They don’t need that family home they have been living in anyway. As long as the rich get their tax cuts it is all good.
So the proposal is to get rid of the property tax deduction? Well for some that is probably a big chunk of change especially if you have a very expensive property with high rates, no one wants to take a hit in anyway. So fighting it makes sense for those effected why give up a dime? And, in high property tax states it might make a difference in the high end home market, which I bet accounts for much of the profit in the real estate business. Especially in places like New York, Chicago, LA, San Francisco. Plenty of Republican House members from those states will have incentive not to vote for something that will hurt their constituents.
This is where I have thought the plan to balance the tax cut on the back of the tax deduction would run into trouble.
Also if people argue for it with a “screw those Blue Staters” logic I think you will only make it more likely for blue state Republicans to flee from supporting this bill.
I’ve read everyone’s take and it’s tough to consider… well, except my friend Annefy. My friend, if you can’t afford to pay the Socialist taxes there, why are you there? How do you pay the Income tax? That’s got to be higher than the Property Tax, right?
For everyone else, I think I agree with Kevin. It you are living so tight that not getting your property tax refunded every April by the Feds would send you to bankruptcy court, you are living too far above your means. I’m not lecturing, it’s just that your reactions surprised me. Back in October, LGI Homes summed up the Mortgage plus the Escrow when I was looking at the house, the numbers looked affordable to me, so I signed on the dotted line. What do you do for food while you wait for April to roll around? I’m sorry, I am genuinely confused right now.
That’s not what he said and that’s not what he thinks.
Nobody should be surprised that the housing lobby will fight this tooth and nail. It always has in the past, and it has been powerful enough in the past to be successful. It needs to be defeated, but it would be more helpful to address their actual arguments.
If you want this kind of tax reform (I certainly do) and you’ve been quiet on (for example) the Ex-Im issue and the Scott Garrett nomination, you have not been working on laying the groundwork to show that this kind of reform can be good for all concerned.
I see your point – heh, rare for you and me – but remember, they are doubling the standard deduction, so you won’t need to itemize any more, unless you are in – quick math – an $800K or above home. Those folks shouldn’t need the Tax Break, should they? I mean, sure, they want it – who wouldn’t want free Federal money – but they don’t need it, do they?
That’s exactly what he said. “remove incentives for all but the ‘very wealthy’ to deduct their mortgage interest — and have a chilling effect on homeownership” – that means he thinks people won’t buy a house if they can’t get their Property Tax back from the Federal Government.
As far as wanting Tax Reform, I hope I have been clear that all I want right now is a 15% Corporate Tax to get the Economy roaring (George W Bush already gave me personally a great Tax Rate) and they can dilly-dally around with the Income Tax charts next year.
I love the part where a tax cut involves people pay MORE in taxes. Only in DC does this sell. Only the conservatives will support this.
Yeah, it does appear that this punishes the Blue States. I sit here smiling because I don’t have an Income tax and we hammer our Legislature to keep Property taxes low. They work for us, not the other way around like in the Blue States.
But on the other hand, I have never understood this whole thing about the feds writing people a check because their state has an Income Tax? So I don’t know, maybe I shouldn’t have posted this. Us in the Red States think it’s pretty good.
Fake Man, maybe you can do a rebuttal Post to put me in my place? Let’s start a good old-fashioned Hatfield-McCoy WAR.
No, that’s not what it means. It means it will have a chilling effect on home ownership. That might mean some people won’t buy a house. It more likely means some people will buy a less expensive house. It means it will have a depressing effect on house prices. That means less income and less profitability for the housing industry. There are many ways to have a chilling effect on homeownership. It’s not as simple as buy a house/not buy a house.
By the way, I’m in favor of a depressing effect on house prices if it means more people can afford a home. But there are people leveraged to the max who will be hurt by it. We shouldn’t turn our backs on those people or pretend they will not be affected. Doubling the standard deduction will help a lot of them, but you can be sure that those who still will be hurt will have a voice in the mass media.
Right on. California has some pretty expensive real estate, particularly in Orange County. It does change home ownership in places like that.
I mean, the tax property refund is nice, but it just takes a small chunk out of what we have to pay in because my husband is technically self-employed. The government punishes self-employed citizens with taxes to a point of ridiculousness.
They are kulaks. They’re too independent and too used to making their own decisions. They must be eliminated.
Why not phase it out over 15-20 years?
I’m sorry – Where did I say I couldn’t afford the property taxes? And for that matter the Income Taxes? I can afford to pay both, even if I lose the tax deduction on both. I’ll simply increase the money we put into a 401(k) or an IRA (lucky me).
It wasn’t always thus – I’m not thrilled about being in my late 50’s … but economic realities would have been different in my 30s. We were blessed for many years to have significant tax deductions … I mean kids, but I’d be lying that losing a deduction like property taxes or home mortgage interest wouldn’t have been a game changer in years past. Game changer = sending our kids to public instead of parochial schools. Ironic, as I would have then been a burden to the state in that case.
As to why I am here? Please don’t go all Kevin Williamson on me. We all make our choices and our deals with the devil and it’s not all based on economics. Why is it Conservatives are all about family, but suggest a U-Haul at the first opportunity?
I am very familiar with the California real estate market and whether property taxes being a deduction is a game changer I can’t say. I look at the buyers in my area every month; it’s not my kids. And it’s not their peers. Many of the sales are all cash (try to compete with that even if you have a great credit score and a great income and a $100K deposit). So who’s got that kind of cash? Chinese buyers.
Thinking about it, at least in my area (San Gabriel Valley, CA), I’m guessing that losing the property taxes as a deduction is NOT a game changer. Not a game changer in terms of the real estate market; builders will build and sellers will get a high price. A game changer demographically? I’m not smart enough to know if that matters.
This is a very convoluted issue and it’s worth getting the facts straight before taking an ideological spin on the whole thing. I read a pretty detailed article about the proposed changes yesterday, and I still don’t understand the half of it.
First off, the core of the lobbyist’s argument itself is very convoluted. The plan right now is to double the standard deduction. For most middle class taxpayers currently deducting mortgage interest/property taxes, this means that they will save more money if they just take the new standard deduction than if they itemize. Result: these taxpayers no longer have a tax incentive to own a house even without touching the property deductions themselves.
What’s really going on here is that House Republicans want to eliminate a number of deductions that primarily go to the wealthy. But a small share of those deductions are also enjoyed by middle class taxpayers. So to protect that small group of middle-class taxpayers, the Republicans are proposing a simple trick: just double the standard deduction. This means that middle-class homeowners using property tag + mortgage interest deductions will still see their taxes drop even if those deductions are eliminated.
So nobody in the middle class will be paying higher taxes under this plan. The only thing that’s missing is the slight “nudge” by the government to encourage home ownership. And as we speak, there are negotiations to put a flat-rate “home ownership” deduction back into the tax code.
Clear as mud, right?
From an ideological perspective, the increase in the deduction itself is actually much more interesting.
The main effect of doubling the standard deduction is that many more middle class citizens will now be paying $0 in federal taxes.
Remember back in 2012 when Romney made the comment about how 45% of voters don’t pay any federal taxes so they have no vested interest in smaller government? It was the one time everyone on the right agreed with him.
Now, both Trump and House leaders are united that they want to increase that percentage of Americans who pay no federal taxes. Predictably, nobody on the right cares anymore.
But the question still remains: is this the direction we want to go in? I’m always for lowering taxes on the middle class, but zeroing out millions of Americans’ liability is not the way to go, in my opinion. But as I wrote in my last comment, raising the deduction is a great accounting trick to shield middle class Americans from elimination of many bad deductions. So it’s not a black-and-white issue.
“eliminate the federal deduction for state and local taxes and doubling the standard deduction”
Did you miss the part about doubling the standard deduction?
I live in a high tax state. My property taxes will be over $7000 this year, and my state income tax even more.
But if they double the standard deduction, it will come out very close to a wash. And don’t forget this includes lowering the marginal rates, so the amount in excess of that will be be taxed less.
You can make a similar argument against any policy change, though. People plan their future around the status quo, so rescinding any policy that provides people money/assistance/favorable treatment will result in some people having the rug pulled out from under them. It’s inevitable and impossible to avoid.
By your logic, we’ll never, ever be able to repeal Obamacare without replacing it with something even more generous.
I’d like to see a true alternative minimum tax – everybody pays something (2% of gross income would probably a good starting point) no matter what. If the “standard” income tax system shows you owing more, than you pay that instead.
But it’s not Federal money it’s their money. Or so we argue all the time. Point is paying for a increased deduction on the back of property tax write offs is a bum deal for the guys who use the write off. And now the Republican argument is they can afford it? Thats the argument always used by Dems. I think people will notice.
Why should your money be taxed twice? It is a strong moral argument. It’s what we use for estate taxes.
44% of Americans don’t pay income taxes. This is not the same thing as not paying any federal taxes. Only 19% of American households do not pay any federal taxes. 26.4% pay only payroll taxes, 35.9% pay both but their payroll taxes are greater than their income taxes, 12.6% pay both but income outweighs payroll, and 7.2% pay only income, not payroll. Source. In 2016, the US took in $3.2 trillion, with $1.1T being the payroll taxes that a quarter of the country pays without paying an “income tax.” Source. Also in 2016, payroll taxes paid for 56% of all government expenditure. Source. I’m really unsure how a quarter of American households get turned into freeloaders or free riders when they are putting money in the pot that funds over half of government expenditure.
And yes, it really should be shocking that over half the government’s work is to take money from the young, healthy, and relatively poor and give it to the old, sick, and relatively wealthy.
I’m a firm believer that you should be able to deduct every penny of direct taxes paid – sales taxes, property taxes, income taxes, excise taxes on your utility bills, etc.
But until they do that, why these particular taxes be included?
I live in public housing. About half of the units are rented to old, sick and poor, or we wouldn’t be here.