The White House today released a smattering of details surrounding its plan for tax reform, and Realtors® are wary. Despite the plan’s proponents reaffirming in a news conference that the plan was created with homeownership in mind, National Association of Realtors® president William E. Brown says homeowners should take heed.
“While we appreciate the Administration’s stated commitment to protecting homeownership,” Brown said, “this plan does anything but.”
Brown noted that while the President’s tax proposal is well-intentioned, it presents some critical concerns for housing and real estate investment. In particular, Brown noted that by doubling the standard deduction and repealing the state and local tax deduction, the plan would effectively nullify the current tax benefits of owning a home for all but a very few tax filers.
“The mortgage interest deduction and the state and local tax deduction make homeownership more affordable, while 1031 like-kind exchanges help investors keep inventory on the market and money flowing to local communities,” Brown said. “Those tax incentives are at risk in the tax plan released today.”
Real estate now makes up more than 19 percent of America’s gross domestic product, Brown said, totaling more than $3 trillion in U.S. investments.
He further noted that homeowners might actually see a drop in the value of their home if the current tax incentives for homeownership were to disappear, costing equity and potentially putting them underwater, even as homebuyers are priced out of the market.
Above all, Brown noted that homeowners face challenges that renters don’t, adding that there’s a reason America has encouraged homeownership through the tax code for over a century.
“Homeowners put their hard-earned money on the line to make an investment in themselves and their communities, and it’s on them to protect that investment,” he said. “Common sense says owning a home isn’t the same as renting one, and American’s tax code shouldn’t treat those activities the same either.”
The plan released today is by no means the end of the road for tax reform, of course, and NAR is working closely with members of Congress as well as the president’s team to ensure the Realtor® message is heard in Washington.
“Realtors® support tax reform, and it’s encouraging to see leaders in Washington doing their part to get there,” Brown said. “We believe tax rates should come down to the degree that sound fiscal policy allows. It’s a goal we share with the authors of this tax plan, but getting there by eliminating the incentives for homeownership is the wrong approach. We look forward to working with leaders in Congress and the administration to reform the tax code, while preserving America’s long-held commitment to homeownership.”