Republican Tax Reform Plan Slams Middle Class

Filed in Advocacy, Codes and Standards by on November 2, 2017 31 Comments

NAHB Chairman Granger MacDonald released the following statement of NAHB’s opposition to the Republican tax reform bill:

“The House Republican tax reform plan abandons middle-class taxpayers in favor of high-income Americans and wealthy corporations. The bill eviscerates existing housing tax benefits by drastically reducing the number of home owners who can take advantage of mortgage interest and property tax incentives.

“And capping mortgage interest at $500,000 for new home purchases means that home buyers in expensive markets will effectively lose this housing tax benefit moving forward.

“The House leadership killed a cost-effective plan proposed by NAHB that Ways and Means Committee leaders agreed to include in the legislation. It would provide a robust homeownership tax credit that would have helped up to 37 million additional home owners who do not currently itemize. Most of them are low- and moderate-income home owners.

“Meanwhile, as corporations receive a major tax cut, small businesses, which generate the lion’s share of job growth, get limited relief.

“The bottom line: Congress is ignoring the needs of America’s working-class families and small businesses.

“And by undermining the nation’s longstanding support for homeownership and threatening to lower the value of the largest asset held by most American families, this tax reform plan will put millions of home owners at risk.”

This infographic illustrates how each state would be impacted by a cap on the mortgage interest deduction.

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Comments (31)

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  1. Jan Williams says:

    It’s about time. Not good for so many Americans. What are they thinking?

  2. Chris says:

    This is going to cause a dip in the housing market across the country. Why do this?
    This is worrisome as the housing market was barely recovering from the recession.

  3. David Speltz says:

    Mortgage deductions drop from 1M to 500K. And that is good for the rich and bad for the poor? C/mon….

  4. Chris says:

    The current path of deficit spending also creates a significant issue for future generations. Increasing GDP is the only way to get us out of this mess.

  5. bill detournillon says:

    completely disagree. the overall benefit to the middle class is clear. another example of self serving lobbyist who have only one goal and that is to self preserve. doubling the standard deduction is not even considered when making these comments. I have personally never seen a homebuyer make a decision to buy a home BECAUSE they get to deduct the interest on their mortgage. I personally have bought and sold 9 homes and not once was the decision to deduct the interest considered. it also is not a consideration when determining if a potential home buyer will qualify.

    • Dan Thomas says:

      I too have bought many homes over the course of my life. The interest deduction is an important decision for those who understand it or need it as a component of buying a new home. The $4000 +/- or so I get to claim most years is an important part of how I plan my financial world. If this does not matter to you, you are either ignorant of its benefit, or don’t need it. Either case makes you unqualified to give an opinion that should be considered.

      • bill says:

        I don’t think I am ignorant although certainly not as smart as our Washington elected officials. and you are correct about not needing it. I suspect that you don’t NEED it either but we both will darn sure use it. what I have done is assist over 10,000 people buy homes with a mortgage in the last 7 years. remember this is about middle class not the top earners. middle class in our area is $80,000 combined annual income. there is an immediate benefit to doubling the standard deduction that will significantly reduce the number of home buyers who will qualify for interest deduction and 95% will not exceed the $500,000 mortgage amount. I suspect there will be much more about the details of the proposal and look forward to hearing as much as possible. first time homebuyers obstacles are credit score, down payment, and DTI. mortgage interest deduction is a possible benefit, but usually not anywhere close to the reason someone buys their first house. oh yeah I am in a flyover state and maybe this is not good for the coasts.

      • Alan says:

        It isn’t an issue of whether individuals use the deduction in their financial planning, it is whether the US Government should be indirectly subsidizing the purchase through tax deductions. Good for you that you are smart enough to recognize free money, bad for everyone else that we get to pay for your financial savvy. The deduction needs to be limited, upper end middle class homes may cost more than $500,000 in some housing markets, but it is not appropriate to subsidize the upper end of consumer choice.
        For your attempt to shut down conversation by labeling someone as unqualified because they have an opinion different from yours, realize that is classic liberal thinking. I agree with your position that reducing the tax break will impact sales and housing markets, but it isn’t just about me and my industry, I don’t want America to end up like Greece by opposing reasonable decisions that happen to hit my wallet too.

    • John Morgan says:

      As a small business owner i can tell you individuals definitely weigh the tax offset from their mortgage deduction when they buy homes. Their willingness to take on additional debt is always supported by the deduction on the income side. With a cap, it will limit discretionary spending on homes which is a huge sector of our GDP and job force. This is not a good proposition for housing growth or the job market in general. To say that individuals do not evaluate the net cost of ownership in a home is short sighted.

  6. As a small real estate invester for low income
    Rental people, I have NO mortgages & my rents are low.
    Under the present Bill I would get NO deductions
    Repairs & labor
    State taxes
    Real estate taxes
    Home owners dues
    Special assessments for condominiums repairs

    In effect i would get NO deductions at all? This
    Would force me to sell ALL the low rental units
    & put the money in Tax Free Government Bonds.

    I lose, the renters lose & the government pays
    Again! Why is this good?
    I am also a member of the NAHB.

    • Well Said. Also, The mortgage interest deduction is always part of the purchase consideration. It is considered a standard of the deal, automatic and makes the difference for first time home buyers. The tax on large income for companies and individual at 35% is probably before deductions. Seems logical if I earn $60,000 annually and homes at 40% of my income, I’ll need the deduction or I be forced to rent. A larger % of renters do not get to build their biggest asset. Earning $250,000 annually as an individual in a Average annual income area of $75,000 is a considerable difference. I support housing and home ownership. Cutting corporate tax at 35% by 10% is 31.5% and is a huge tax cut.

    • Jerry says:

      As a business, those items would be still deductible as business expenses.

  7. Charlie Ruma says:

    God bless Jerry Howard, he did a great job of presenting our case. Let’s hope we can fix the problems in the Senate.

  8. This is a bad bill. Housing and home ownership represent stability. Home Ownership builds equity and supports incentives for starting small business. Incentives for the middle class fund small business. Small Businesses grow and hire more people. This is one of the promises of America. Many large business started as small business.

  9. Greg says:

    Get out your calculator and do a bit of math. The analysis and conclusions made by this article are absurd. Most “working class” Americans wouldn’t reach the cap of $500,000 in 20 years of home ownership. Even further, most “low- and moderate-level homeowners won’t be affected by this cap at all, as they fall below the level of most “working class” Americans. Add the other consideration of the fact that most homeowners move on average every 7 – 8 years or so…doesn’t leave a lot of “working class” or “low- and moderate-level homeowners that this will have much impact upon.

    • Jerry says:

      In addition, it is only for mortgages above $500K. Many of those buying the more expensive houses have a significant down payment from selling their old house. Someone buying a $800K house with a $350K down payment would not be affected.
      Taking an estimate of mortgaging 3x your annual income, someone would have to be making $167K per year to be affected. That is significantly above middle class except in the most expensive parts of the country.

    • Dan Thomas says:

      It’s not a cumulative cap of $500,000 in interest expense.
      It’s a deduction for loans up to first $500,000, which is some markets (not mine) is a middle class owner.

      • Jerry says:

        I’d like to know which market. Even here Greater Washington, DC,, while some areas are expensive, there are many areas which are quite affordable. If you want to live next to the Obamas, in Georgetown or even Potomac, MD, you’ll pay the price. But Laurel, MD, Woodbridge, VA and many other areas are quite affordable.

  10. Gary says:

    Nahb leadership has Schumer-Pelosi talking
    Points down pat!

  11. John Morgan says:

    Lets just hope the “working class” you mention doesn’t work in the housing sector because if so they may be out of a job. Very short sided to look at this and say it doesn’t affect the working class directly so its a good thing. Whens the last time the federal government gave the working class a job or raise. We need our market place strong and this bill mainly helps corporations. It does nothing for the small business or the housing industry which many middle class individuals work in. I am a small custom builder who employs 20 “middle class” individuals. They will be hurt by this bill more than anyone,

    • Jerry says:

      I think this is going to increase opportunities for the majority of builders. Those who do the high end homes may possibly suffer a bit – but the increase in standard deduction means more money to the average working family.

  12. Phil Smith says:

    How is $500,000 and above hurting the middle class? And for those buying above that line it may or may not factor in their decision but if It does they will still buy and adjust what they buy. If we want Tax reform we cannot expect everyone else to give something up and housing to give up nothing. This is the same way AARP lobbyist work and why I am not an AARP member. What is good for the country is ultimately good for us all. We should be more concerned about the tax bill’s effect on small business and the lack of deductions there. Since most HBA members are small businesses, they should be voicing their opposition based on this so they do not look like the self serving lobbyists they are. This is what gives lobbyists a bad reputation and how they lose credibility with congressmen and voters.

  13. Bob Whitten says:

    Since when does a middle class American have a mortgage of over $500K? Maybe the associations definition of “middle class” needs a review!

    I totally disagree with slamming the republican initiative as horrible as done in this news release. Where are the facts to support this position?

    Most small builder businesses will welcome the corporate income tax relief!

    • Phil SMith says:

      Bob, I agree but the Last statement you made might not be true and I am only saying that because the NFIB does not like the bill. I have not read it in its entirety but suspect it may not help small business as much as larger ones. If that is the case , there is where the NAHB should be focusing its attack, not on the mortgage deduction that seems a fair compromise to me. And certainly not the attempt to fix this huge problem that will take a little give from all to work.

  14. Ken Krantz says:

    No big deal. So they drop deductions from 1 million to $500,000, that’s a great decision in a tax plan. If anybody wants to build a home over $500,000… Then they should pay extra tax over that. If you don’t want to pay tax on homes costing over 500,000 dollar homes ……. then please restrict yourself to a $500,000 home or less. This is where 95% or more of the homes are built within that cost range anyway.

  15. N Hyman says:

    To Trump and the GOP congressional delegations, “Tax Reforms” = Tax Cuts, The “Tax Reforms” proposals floating around are shams, and if enacted, will simply be financed in large part by increasing the deficit.

    • Jerry says:

      Did you complain when Obama added more to the deficit in eight years than all Presidents ahead of him combined? Why didn’t you?

  16. Tommy says:

    So when did the NAHB become a liberal association? I’m a builder, and I see nothing that will negatively affect my business or keep people from purchasing a home. The standard deduction doubles helping A LOT of people who don’t itemize currently. The mortgage interest deduction limit of mortgage less than $500k will only affect the upper class mostly, so no impact on vast majority of middle class that everybody screams about. And if you’re buying a home with a large mortgage to get the tax benefit of the interest deduction, well that’s just stupid. Let’s send the bank an extra $10k in interest so I can save $2500 on my taxes? C’mon man!

    The tax rates go down and the income brackets increase which gives most middle class people a tax cut. The state income tax deduction probably has the biggest impact of all these for middle class, but again, it hurts the upper class much more that anyone. I can’t see why everyone is fussing about this, especially the NAHB of which I’m a member. I’m disappointed in them.

  17. Jill says:

    I want to know what first time home owner can afford a home over $500,000? Certainly not In Wisconsin!

  18. George Hutchinson says:

    The GOP has really messed up this time. They are trying to kill the housing industry.

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