NAHB’s Strategy in the Tax Reform Debate

Filed in Capitol Hill, Economics by on October 20, 2017 8 Comments

NAHB is working hard to ensure our industry’s priorities are addressed as the tax reform debate unfolds on Capitol Hill. While the framework put forth by President Trump and Republican congressional leaders keeps the mortgage interest deduction intact, its effectiveness would be diminished as more families elect to take a higher standard deduction — a provision that has rare bipartisan support.

Tax reform also will affect our members as business owners, where lower rates and a simpler system could spur economic growth but also poses risk to our debt-dependent industry if deductions for business interest are curtailed. Multifamily developers face risks if there are changes to depreciation periods, carried interest, or like-kind exchanges.

We are committed to fight for the best policies to support our industry and the consumers we serve. We will not sit on the sidelines during this debate and let others decide our fate. Our willingness to discuss new tax policies to support housing ensures that NAHB has a seat at the table throughout the process.

Already, in our talks with leaders on Capitol Hill, lawmakers have acknowledged the need to retain an effective housing tax incentive in the tax code. Ultimately, our support for a final tax relief package will depend on whether it is fair and promotes greater housing opportunity for renters and home owners across the economic spectrum.

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  1. Rick Dreiband says:

    Why are you in favor of repealing the alternative minimum tax and the estate tax. Are many of your members affected by these? Please explain what the repeal would accomplish?

    • NAHB Now says:

      The vast majority of home builders structure their businesses as pass-through entities, such as sole proprietorships, partnerships, LLCs, and S-corporations. This means their business income is taxed on their individual tax returns and may be subject to rules such as the Alternative Minimum Tax (AMT). The AMT can act as a tax increase on their business income by including interest from tax-exempt bonds in taxable income and imposing different depreciation rules. It can even prohibit businesses from claiming certain business tax credits that they otherwise would be eligible to use . This adds unnecessary complexity and uncertainty into business planning. NAHB supports tax reform, in part, to simplify the tax code.

      Many home builders also are family-owned businesses. Home builders may invest in land for future development, and multi-family developers may have substantial real estate holdings in the form of apartment buildings. Again, if the business is structured as a pass-through, its assets may be subject to the estate tax upon the death of the business owner. If the estate tax owed on these transferred assets exceeds the business’ liquid assets, the owner’s heirs may be forced to sell the business just to pay taxes. We believe strongly that taxes should not stand in the way of passing down a family business to the next generation.

      • LD says:

        I was wondering the same thing. Thank you, this makes a lot of sense! Great to see NAHB so proactive and involved…unlike the AIA…

  2. Don Griffin says:

    You do know that when these are put in place that they are paying for it from increasing the overall tax on the middle class. So it looks great on the cover, but the net effect is more costly for those that need the break. In addition, any tax credit to home buyers do not help those in homes and can be taken away just as fast as it was put in place due to less opposition. It’s giving in for a promise and “willing to” philosophy that may not ever pan out or last long term. Are you willing for the middle class to be taxed more for the hope of future breaks? It sounds like a way for the rich to get richer versus the middle class being eased to spend more to help business survive. I would suggest working with NAR a little more, as they are more in tune with the real estate market and what it is going to take to keep it going in the future. If we don’t have a real estate market that is healthy, people are not buying or building homes. That will cripple this economy.

    • NAHB Now says:

      We agree that tax reform must not harm the middle class. The details released so far indicate that the potential direction of tax reform could be positive for the industry. That is why NAHB has supported the framework. And as the legislation is being drafted, we are fighting for a tax system that will increase economic opportunities, expand the middle class and ensure that affordable homeownership and rental housing opportunities remain an accessible goal. And when Congress releases a bill, NAHB will decide if it is a product we can support.

      As for the tax credit, allow us to clear up some confusion, as you wrote that it would not help those who already own homes. On the contrary, what we have proposed is to allow all homeowners to take a tax credit against mortgage interest paid. Like the mortgage interest deduction, any homeowner with a mortgage would be able to claim the new credit. Unlike the mortgage interest deduction, a credit would not just be limited to itemizers—every eligible homeowner would benefit, providing a new tax incentive to millions of middle-class homeowners who do not currently itemize.

      • Don Griffin says:

        Thank you for your in-depth response. It is extremely important that it’s done right to not slow the momentum we have in the industry for buyers to accomplish the American Dream. To much is at risk. Appreciate your time and consideration!

  3. There is a mechanism in place that would be a great help for, not only for all construction companies, but for all companies that build, produce or make things in the US, and employ Americans. That is the Domestic Production deduction. Now it is a 9% deduction from domestic production net income. If that was a 50% deduction, instead of a 9% deduction, can you imagine the impact that would have on domestic production, and indirectly on home ownership?

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