 |
Real Estate News and Advice |
July 10, 2009 |
|
|
|
|
 Will Bush's Tax Reform Initiatives Hurt Housing?
by Blanche Evans
On September 2, 2004, President George Bush issued a press statement about his willingness to lead tax reform as a key priority. Making the tax code simpler and increasing long-run economic growth and job creation are the goals. "Taxes should be applied fairly, and reform should recognize the importance of homeownership and charity in our American society." President Bush's solution is to appoint a bipartisan panel to advise the Treasury Secretary on options to "fundamentally reform the tax code to make it simpler, fairer, and pro-growth." The panel, composed of "experts, economists, and economically knowledgeable and experienced people of both political parties," will "consult, debate and provide its report as early as 2005." Ever since President Bush announced his desire to reform the tax code, the housing industry has been waiting for the other shoe to drop. Specifically, is the call for tax reform a way to let tax increases in the backdoor? With a record deficit and no signs of relief due to a slowing economy, some sectors are looking at the idea of tax reform with more than a little trepidation - especially the fatted housing industry. Housing has been the underpinning of the economy through "tech-wreck," or the halving of the NASDAQ, and through 9-11, when low interest rates and housing initiatives helped push homeownership to record levels of near 70 percent. Housing is a plump bird that may look tasty to reformists. Nearly every year, the National Association of Realtors®' lobbyists battle congresspersons who propose ideas to take tax benefits away from homeowners. Homeowners currently benefit by being able to deduct a portion of their mortgage interest from their income taxes. They are also able to deduct state property taxes from their federal income taxes. Third, they are able to keep a large amount of capital gains if they occupy a homestead for two out of five years, up to $250,000 for single filers and $500,000 for married couples. While the debate begins, there's no immediate threat against housing, but it's prudent to prepare for an assault, as tax reforms can't give in one area without taking away from another. No less an opponent than John Edwards, while campaigning against President Bush and Vice-president Cheney, said it was the President's intention to eliminate homeowner tax benefits, which Bush denied shortly after winning the election. But that does little to ease fears. Steve Cook, spokesperson for the NAR, expects a long, loud debate over the reforms. "NAR's position has not changed a bit," says Cook. "Al Mansell (NAR's new president,) said very clearly that NAR will continue to fight to maintain the mortgage interest deduction." Cook says Bush has done much to promote minority housing, which suggests that he may wish to leave housing alone. A change in tax benefits for homeowners makes housing more expensive for everyone. "It's a middle-class tax incentive," Cook explains. "If you are worth a lot, it doesn't mean that much, but it means a lot to the middle class." The NAR doesn't have current data on what the loss of tax incentives would really do to the housing portion of the economy, but most would agree that any impact would be painful. Many already predict that rising interest rates alone could cramp housing, much less the loss of incentives to own. "Such ill-conceived proposals should be viewed as what they really are—hidden tax increases for the nation's homeowners, specifically, the middle class," says Cook. "A little more than 60 percent of the families who claim the mortgage interest deduction have household incomes between $60,000 and $200,000. Even those making under $5,000 adjusted gross income are using this tax advantage; in fact, about 152,000 of the 36 million returns that utilize the deduction show an adjusted gross income of less than $5,000. He also points out that leadership talking points include NAR's survey results that tax incentives for first-time homebuyers rank high, and among repeat homebuyers, tax deductions are often specifically mentioned as reasons to buy a home. Before the housing industry and homeowners face any real threats, a lot has to happen first. "We don't know what recommendations will flow from the tax reform panel's work," says Cook. "Congress will write the legislation, and they have their points of view on various legislation. What we do know, he says, is that the US homeownership rate reached a record 69.2 percent in the second quarter of 2004, and has probably grown more by a fraction. If the number of homeowners in the United States reached 73.4 million, the most ever, that means that for the first time, the majority of minority Americans own their own homes. If the President's goal is to increase the number of minority homeowners by 5.5 million families by the end of the decade, he surely won't want to be leave a legacy of shortchanging his own initiative. Published: November 26, 2004 Use of this article without permission is a violation of federal copyright laws. 
Related Articles:
|
Real Estate News Network
Today's Real Estate Outlook
 Spotlight
Today's Headlines
|
|||||||||||||||||
| ||||||||||||||||||
|
for Agents
Readers' Choice
|
||||||||||||||||||
Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68.
