|Committee for a Responsible Federal Budget:
House Passes Historic Debt Increase
November 16, 2017
The House of Representatives passed a tax cut package today that will add $1.5 trillion or more to the national debt. The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:
The House approved debt-financed tax cuts based on predictions of magical economic growth that defy history and all credible analyses.
Tax reform should grow the economy and not add to the debt. Unfortunately, lawmakers are assuming faster economic growth will pay for that debt increase when there is no evidence it will cover more than a fraction of the tax bill’s costs.
The last time Congress added 10-figures worth of tax cuts to the debt in 2001, it blew a hole in the budget and helped erase our surpluses — despite claims that economic growth would cover the cost. The growth fairy did not appear then, and it would be unwise to assume she will this time around.
What is so stunning is that we are considering trying this again at a truly unprecedented moment in our fiscal history. When the tax cuts of 2001 were passed, debt was 31 percent of GDP, the nation was running budget surpluses, and we were on track to pay off our debt. Today, debt is 77 percent of GDP — higher than any time in history other than just after World War II — and trillion-dollar deficits are on track to return by 2022.
Already, we are projected to borrow another $10 trillion over the coming decade. The answer must not be to pile more debt on top of that.
This bill is a lost opportunity to truly reform the tax code in a way that would maximize economic growth by broadening the base and eliminating special interest tax breaks while lowering rates and modernizing our tax code.
Instead of trickling down economic growth, the House plan will unleash a tidal wave of debt that will ultimately slow wage growth and hurt the economy.
|The AARP on How H.R. 1 Could Negatively Impact People Over 65
International Association of Fire Fighters Letter to the House of Representatives
November 15, 2017
On behalf of the nation’s more than 310,000 professional fire fighters and emergency medical personnel, I am urging you to protect our nation’s first responders when voting tomorrow on tax reform. There are two specific provisions currently outlined in tax reform that the IAFF would like to see addressed before passage.
1) First, I urge you to protect state and local pension plans from unfair taxation by not applying unrelated business income taxes (UBIT) to plan investments.
Vital government services such as fire protection are provided for the public good, and have been treated that way in statute for decades. That is why current law protects state and local pension investments from taxes on unintended business income. H.R. 1 through amending section 5001 of the tax code would change this protection and retroactively apply UBIT to all appropriate pension plan investments.
This type of change would wreak havoc on pension plans whose long-term investments in part were based on UBIT not being applied. In addition to the revenue loss by pension plans and the federal government, the provision imposes significant and complex compliance costs that could impact portfolio construction and diversification of public funds. This plan would also diminish investment earnings, critical to proper pension funding by forcing the consideration of alternative and more costly investment structures.
Investment earnings pay for approximately two-thirds of state and local government pension benefits, which are taxed when distributed to participants across virtually every state, city and town in the nation. Subjecting public plans to the UBIT will result in a drag on these critically important investment returns, set a dangerous precedent for taxation of state entities and will ultimately increase costs to taxpayers.
2) Second, I urge you to protect the State and Local Tax (SALT) deduction which helps local governments effectively fund vital public safety services.
Fire departments are funded through local taxes that are levied at a fair rate, based on meeting the needs of the community. Eliminating the SALT deduction, one of the oldest provisions of the tax code, would result in higher tax liabilities for millions of middle class workers. To ease the burden of these new taxes municipalities and local governments are likely to lower taxes to levels that simply do not meet the needs of fire departments.
Proponents of eliminating SALT argue it only benefits the wealthy. The truth is that 40 percent of taxpayers with adjusted gross income between $50,000 and $75,000 claim the deduction while 86 percent of all tax payers claiming the deduction earn under $200,000 per year. Those working to eliminate the deduction claim it only impacts a select few in a small number of states, when in fact the deduction impacts all working-class Americans, both Democrat and Republican. For example, more than 90 percent of middle income taxpayers in Utah and more than 84 percent of in Texas claim the SALT deduction.
The partial repeal in the House plan would upset the carefully balanced fiscal federalism that has existed since the creation of the tax code, and it would result in unprecedented double taxation on taxpayers, forcing them to pay a federal tax on monies already paid in state and local taxes. It would effectively increase marginal tax rates and could lead to lower home values and cuts to critical services such as the ones provided by fire fighters across the country.
These issues especially, will have a detrimental impact on the fire service. The ability for our nation’s first responders to do their job and plan for an adequate retirement will be
significantly stunted if they were to be included in any final tax reform package.
Tomorrow, when the House begins to debate and then votes on H.R. 1, I urge you to support the full preservation of SALT and protection of public pension plans from UBIT.
Harold A. Schaitberger
Fraternal Order of Police Opposes Republicans' Elimination of SALT Deduction
November 14, 2017
The Honorable Paul D. Ryan
Speaker of the House
H-232, The Capitol
Washington, D.C. 20515
The Honorable Mitch McConnell
Senate Majority Leader
S-230, The Capitol
Washington, D.C. 20510
The Honorable Nancy Pelosi
House Minority Leader
H-204, The Capitol
Washington, D.C. 20515
The Honorable Charles E. Schumer
Senate Minority Leader
S-221, The Capitol
Washington, D.C. 20510
Dear Mr. Speaker, Senator McConnell, Representative Pelosi and Senator Schumer,
I am writing on behalf of the members of the Fraternal Order of Police to urge you to protect the State and local tax (SALT) deduction in the current tax code. Our members put their lives and safety at risk to protect our homes, schools and communities. Their salaries and the equipment they use are paid for by State and local taxes on property, sales and income. These funds are then invested in our law enforcement agencies and the men and women serving in law enforcement.
The FOP is very concerned that the partial of total elimination of SALT deductions will endanger the ability of our State and local government to fund these agencies and recruit the men and women we need to keep us safe. In addition, our members are also citizens of the communities who work and pay these State and local taxes. The elimination of the SALT deductions, in whole or in part, will be deeply harmful to them and their families, effectively raising their taxes as much as $6,300 according to recent studies. The SALT deduction has been part of the tax code since it was originally drafted in 1913. Our members would certainly oppose any effort of the Federal government to tax their income twice by eliminating the SALT deduction.
On behalf of the more than 333,000 members of the Fraternal Order of the Police, I urge Congress to preserve the SALT deductions, to reject any effort to eliminate, in whole or in part, these deductions and oppose the final bill if these deductions are included. I thank you in advance for your consideration of our view. Please feel free to contact me or my Senior Advisor Jim Pasco if I can provide any additional information on this important issue.
NJ Chamber of Commerce Comes Out Against GOP Tax reform bill
Burlington County Times, November 6, 2017
By David Levinsky
The business group’s opposition was surprising given that the bill calls for the corporate business
tax to drop from 35 to 20 percent, a significant reduction that President Donald Trump and other
supporters have touted as a way to encourage business to expand and hire more employees.
Add the New Jersey Chamber of Commerce to the list of people and groups opposed to the
Republicans’ sweeping tax reform bill.
Tom Bracken, president of the state chamber, released a statement critical of the bill on Monday,
saying it would not provide a net benefit for New Jersey like it would other states.
“Any tax reform legislation should result in a net benefit for every state,” Bracken said. “The tax
reform legislation introduced last week would not be a positive for New Jersey. While some
citizens and businesses in the state would benefit, many more would not.”
The business group’s opposition was surprising, given that the bill calls for the corporate
business tax to drop from 35 percent to 20 percent, a significant reduction that President Donald
Trump and other supporters have touted as a way to encourage businesses to expand and hire
The bill also calls for the creation of a so-called “pass-through” business rate of 25 percent for
small businesses and partnerships that don’t pay the corporate income tax but whose profits are
passed through to the owners, who pay taxes on them at their individual tax rate.
The GOP bill would allow small businesses to use the lower rate on about 30 percent of their net
income. The remaining 70 percent would need to be taxed at the owner’s individual rate. It also
doesn’t allow some professional services businesses — such as attorneys, accountants and
architects — to take advantage of the lower rate.
That has drawn criticism from some national business groups such as the National Federation of
Independent Business, whose CEO, Juanita Duggan, said the bill “leaves too many small
“We are concerned that the pass-through provision does not help most small businesses. Small
business is the engine of the economy. We believe that tax reform should provide substantial
relief to all small businesses, so they can reinvest their money, grow and create jobs,” Duggan
U.S. Chamber of Commerce Senior Vice President Neil Bradley was more supportive, saying the
reform bill is “exactly what our nation needs to get our economy growing faster.” But Bradley
also cautioned that “a lot of work remains to be done to get the exact policy mix right and move
from a legislative draft to an enacted law.”
Bracken cited the bill’s elimination of the state and local income and sales tax deduction and the
proposed $10,000 cap on property tax deductions. Those changes have proved to be a
battleground for members of Congress from New Jersey and other high-taxed states like New
York and Illinois, whose residents send more tax dollars to Washington than the state receives
back in federal aid or spending.
Bracken was also critical of a proposed change in the popular mortgage-interest deduction,
which allows homeowners to write off interest on home loans up to $1 million. The deduction is
staying, but the cap is proposed to change for newly purchased homes.
The changes to both those deductions could erode property values in New Jersey and scare off
businesses, he said.
“This proposal is exactly what we do not need at this time,” Bracken said. “This legislation
would make New Jersey less affordable and less competitive, and impede our ability to climb
back to an acceptable level of prosperity.”
Reaction to the tax legislation among the New Jersey congressional delegation has been mixed.
Democrats like U.S. Sens. Cory Booker and Robert Menendez and U.S. Rep. Donald Norcross,
D-1st of Camden, have been critical, arguing that the benefits are lopsided in favor of
corporations and the wealthy rather than the middle class.
Rep. Frank LoBiondo, R-2nd of Ventnor, has also said he would not support the bill as written,
largely because of the loss of the state and local tax deductions.
Rep. Tom MacArthur, R-3rd of Toms River, who led a group of lawmakers that was involved in
closed-door negotiations with Republican leaders, has said he is pushing for some changes
before the bill reaches the House floor for a vote, including to the mortgage interest deduction
cap and the pass-through business provision.
But MacArthur has said the $10,000 cap on the property tax deductions was a big step forward,
given that Republican leaders were previously committed to eliminating the deduction, and that
most taxpayers in Burlington and Ocean counties would fall below the cap.
Ryan/McConnell Plan Slashes State and Local Tax Deduction for Families—But Lets Corporations Keep It
The State and Local Tax (SALT) deduction prevents taxpayers from owing federal taxes on the income they pay in taxes to state and local governments. State and local tax payments are not disposable income, and it is unfair to treat them as such. The SALT deduction is so common-sense that it has been in force since the first federal income tax, adopted more than a century ago, when the whole federal income tax law was 3 pages long.
While it should come as no surprise, the Ryan-McConnell tax bill would allow corporations to continue deducting state and local taxes (SALT), while eliminating the benefit for individuals and families, except for a property tax deduction capped at $10,000.
Currently, more than 100 million Americans in 44 million households claim the deduction for State and Local Taxes (SALT). Almost 40 percent of taxpayers earning between $50,000 and $75,000 claim SALT, and over 70 percent of taxpayers making $100,000 to $200,000 use it. Over half the value of the deduction went to households with incomes below $200,000. People living in every congressional district in every state in the country use this deduction, and it benefits taxpayers of all income levels, directly or indirectly.
Two-thirds of state and local government spending comes from its income and sales taxes. These revenues support essential public services investments, like schools, local law enforcement, fire fighters, road construction and maintenance, and health care. Nearly everyone who itemizes claims the SALT deduction; therefore, the Ryan/McConnell SALT repeal would raise the cost of state and local services on a wide swath of taxpayers. This would pressure state and local governments to reduce revenues and cut crucial public investments.
State and Local Governments Oppose Ryan-McConnell. State and local government organizations are urging Congress to retain the current SALT deduction. These groups include the National Governors Association, the National Association of Counties, the National League of Cities, the U.S. Conference of Mayors, the Government Finance Officers Association, the Council of State Governments, the National Conference of State Legislatures, and the National Association of Towns and Townships.
Many organizations representing public employees also endorse retaining the SALT deduction, including the American Federation of State, County and Municipal Employees, the Service Employees International Union, the American Federation of Teachers, the National Education Association, the National Sheriffs’ Association, and the International Association of Fire Fighters.
Ryan/McConnell Hurts Homeowners. By reducing the number of people who will itemize and limiting the deduction for real estate taxes, Ryan/McConnell discourages home ownership. Both the National Association of Realtors and the National Association of Home Builders (NAHB) oppose the plan. According to NAHB President Granger MacDonald, “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.” NAR President William E. Brown agreed, “The nation’s 1.3 million Realtors cannot support a bill that takes homeownership off the table for millions of middle-class families.”
Repeal of the Medical Expense Deduction
The Republican’s New Health Tax on Sick Americans
The Ryan/McConnell tax plan repeals the Medical Expense Deduction, effectively creating a new Health Tax on sick Americans. This Health Tax would result in a tax increase for millions of Americans with high medical costs, especially older Americans. The end result is a massive tax increase for individuals living with expensive illnesses – like cancer, Alzheimer’s, or a rare disease - to pay for corporate tax cuts.
Under current law, if a tax payer’s qualified medical expenses exceed 10 percent of their income, those expenses can be taken as an itemized deduction. This deduction is important to more than 9 million middle-class Americans who received approximately $87 billion in tax relief in 2015 alone.
The Affordable Care Act helped lower the number of Americans facing medical debt by giving millions health insurance coverage for the first time. However, a severe illness or even medical bills from a car accident, can still mount to thousands of dollars. For the family caring for a premature child, the couple trying to conceive, or the husband caring for a wife diagnosed with Alzheimer’s, this deduction is one way to help prevent medical bills from crushing families in debt. Yet Republicans want to repeal this deduction that helps ensure families can get some relief from these medical bills.
The medical expense deduction is particularly important for older Americans. Over 73 percent of those claiming the tax credit are over 50 years old and 55 percent are over 65 years old. Half of those claiming the tax credit have incomes below $50,000.
It should come as no surprise Republicans would attack seniors with the establishment of this Health Tax. This is just the latest broken GOP promise – and, again, at the expense of seniors and sick taxpayers.
RYAN/MCCONNELL TAX PLAN FAILS STUDENTS AND TEACHERS,
A+ FOR MULTIMILLIONAIRES
Plan would directly cut over $65 billion in aid for students and teachers, at the same time shower the children of the ultra-wealthy with $172 billion in a single tax cut.
The Ryan/McConnell tax plan earns a failing grade when it comes to students and teachers. The bill eliminates several deductions and exclusions that help students pay for their college educations, and, inexplicably, eliminates the above-the-line deduction for teachers’ out-of-pocket expenses. In addition, under the guise of simplification, the plan would eliminate $17.3 billion in tax relief from the American Opportunity Tax Credit. At the same time, changes to the State and Local Tax Deduction and 529 education savings plans could hurt K-12 public schools and public institutions of higher education, and a new tax on private universities will reduce their ability to offer financial aid.
Yet, Republicans will shower the nation’s richest – the ultra-wealthy – by phasing in repeal of the estate tax. This $172 billion tax cut initially only applies to estates that are valued between $11 million and $22 million, but then it applies to all the wealthiest estates once the estate tax is fully repealed in tax years beginning after 2023.
$172 BILLION TAX CUT FOR MULTI MILLIONAIRES,
OVER $65 BILLION DIRECT TAX INCREASE FOR STUDENTS AND TEACHERS,
THREATENS HUNDREDS OF BILLIONS MORE IN INDIRECT CUTS TO PUBLIC EDUCATION
Hurting Students. The bill would repeal above-the-line deductions for interest payments on qualified education loans and tuition and related expenses – direct harm to students in the disguise of simplification. This is a clear attack on the middle class – most of these provisions are already income-tested and targeted to hardworking middle-class Americans.
• 48.0 percent of taxpayers who take the above-the-line deduction for student loan interest make less than $50,000 a year.
• 50.7 percent of taxpayers who take the above-the-line deduction tuition and related expense make less than $50,000 a year.
• About three-quarters of all taxpayers taking these deductions make less than $100,000 a year.
The bill also would repeal the exclusions for interest on United States savings bonds used to pay for tuition, qualified tuition reductions, and employer-provided education assistance. These
provisions would punish employees who are fortunate to have employers who want to invest in their skillsets, by taxing that investment.
Hurting Teachers. Eliminating the $250 above-the-line deduction for teachers’ out-of-pocket expenses is another cruel example of Republican priorities. Every American knows the great lengths that teachers go to in order to make their classrooms strong places for learning. On average, teachers spend $500 of their own money each year to make sure their students have what they need.
Republicans said that they wanted this bill to eliminate tax cuts for the rich. The simple fact is teachers are not the rich. 63 percent of taxpayers taking this deduction belong to households with total incomes under $100,000 a year, and a quarter of them earn less than $50k. What’s worse, this tax increase is not just going to hurt the teacher, it’s going to hurt the student.
Hurting public schools. The bill would divert funds away from public schools in two important ways. First, the bill would limit the state and local tax deduction to only include property taxes up to $10,000. The existing deduction allows the deduction of income, property, and sales taxes. Because most states rely heavily on income taxes to fund their budgets, this bill would make it harder for them to raise sufficient revenues to invest in high-quality education in the coming years. While many local school budgets are funded by property taxes, the change in the deduction will mean that local governments are likely to receive less state support for schools, libraries, and other services. Studies from the Center on Education Policy suggest that the existing state and local tax deduction amounts to a subsidy for K-12 education of roughly $17 billion each year. The Republican tax bill will cut about two-thirds of the $1.3 trillion value of the state and local tax deduction, which would likely be felt in the education budgets of every state.
Second, the bill rewards wealthy families with a tax benefit for taking their children out of public schools and sending them to private schools, part of the Secretary DeVos’s “school choice” (read, voucher) agenda. The existing 529 college savings plan encourages parents to save for their child’s college education by allowing them to earn interest and withdraw money tax-free for higher education. But the tax reform bill would allow parents at any income level to use those same plans for up to $10,000 a year in private school expenses. The changes provide little in the way of choice for poor families, who can’t afford to save for private school. Rather than giving families tax dollars for private schools, the federal government should be looking for ways to support the education of all children.
Hurting Universities. The bill would also impose a new 1.4 percent tax on the investment income on certain university endowments. University endowments help cover schools’ operating budgets and financial aid. Not only are these purposes charitable, but taxing them will put even more upward pressure on students’ tuition and fees.
The Ryan/McConnell Tax Plan Nothing more than the Failed Kansas Experiment on Steroids
The Ryan/McConnell tax plan reduces the corporate tax rate to 20% and reduces the top tax rate for pass-through business income from its current top individual rate of 39.6% to 25%. The Ryan/McConnell tax plan borrows from a tax cut package adopted by the state of Kansas in 2012, which reduced the tax rate on pass-through business income to zero, among other tax cuts. Unfortunately for the American people, Republicans in Congress are being advised by the same supply-side economists that peddled the Kansas tax cut package to Republican Governor Sam Brownback. In fact, Speaker Paul Ryan formerly served as Legislative Director to then Senator Brownback, so it should really be no surprised that we are now seeing the failed Kansas experiment revisited at the national level and we should not expect a different outcome.
All Pain and No Gain
Governor Brownback touted the Kansas package as a “real live experiment” testing the merits of tax cuts, and called the package a “shot of adrenaline” to the state’s economy that would yield immediate benefits and pay for itself. He was wrong. After the tax cuts took effect in 2013, revenues plunged immediately and never recovered. In 2014, budget shortfalls forced the state to tap cash reserves built up in prior years. These reserves were gone by 2015, so state lawmakers, convinced that the experiment needed more time to succeed, slashed spending.
For example, the legislature-approved budget for fiscal year 2015 cut classroom funding, converted the state’s school funding formula into block grants, increased sales, cigarette and liquor taxes, eliminated certain income tax deductions, and made transfers from the highway fund (and other funds). When the state still came up $72 million short at the end of the fiscal year, it delayed school funding, drained the highway fund and cut funds for children’s programs.
Fiscal year 2016 brought more sales tax increases, spending cuts and fund transfers, including $17 million cut in SCHIP, a $47 million transfer from the highway fund, more than $17 million in cuts to higher education. When year-end revenues were again insufficient, the state transferred $277 million from the highway fund and pushed school finance bills into the next fiscal year. The Department of Transportation resorted to funding expenses through record-high bond issuances, even as the state’s highways fell into serious disrepair.
As fiscal year 2017 began, the state was forced to take out $900 million of internal debt to maintain cash flow, and cut Medicaid reimbursement rates and funding for most state agencies. Citing the structural budget imbalance, the credit rating agencies Moody’s and S&P downgraded the state’s credit rating, the second such downgrade since the tax cuts took effect.
Meanwhile, the tax cuts did not deliver the promised economic growth: for the 2013 to 2016 period, Kansas ranked 42nd among all states for GDP growth, behind every other state in the plains region except North Dakota. For the 2013 to 2016 period, Kansas ranked 42nd among all states for GDP growth, behind every other state in the plains region except North Dakota, and well behind its neighbors Missouri and Nebraska, which ranked 29th and 28th, respectively.
Don’t Repeat the Failed Kansas Tax Cut Experiment
The Kansas tax cut package was such a disaster that, after nearly five years of budget pain, the state’s Republican-led legislature repealed it this past June. But Congressional Republicans are ignoring the results of the Kansas tax cut experiment and doubling-down on the supply-side economic theories that the Kansas experiment disproves. They make the outlandish claim that the tax cuts will pay for themselves, create jobs, and lead to immediate wage increases for American workers. In reality, the Ryan/McConnell tax bill will deliver almost all of its benefits to the wealthy and large, publicly-traded corporations, and add more than $1.5 trillion to the deficit over the next ten years. Over the ten-year budget window, the tax cut for corporations will cost the U.S. fisc almost $1.5 trillion dollars, and the rate cut for pass-through income will cost the U.S. fisc almost $450 billion. Drastic, debt-funded tax cuts like these will mortgage the future of this country, harm our economy and squeeze out the opportunity for genuine reform that helps the struggling American middle class.
These powerful business groups hate the GOP tax plan
by Matt Egan, November 3, 2017
What's in the GOP proposed tax plan
President Trump argues the GOP tax overhaul will "create tremendous success for companies." Yet some of America's most powerful business alliances are already trying to kill the bill.
The instant opposition of well-organized and deep-pocketed lobbying groups threatens to delay or even derail passage of the legislation, which House Republicans unveiled on Thursday.
Three of the country's largest and most influential business groups have already come out against the GOP bill.
"These three groups aren't 'lean no' -- they are full-blown, burn-it-to-the ground 'no'," Chris Krueger, managing director of the Cowen Washington Research Group, wrote in a report on Friday.
This hostility underscores why it's so difficult to get tax reform done: entrenched interests will always fight tooth and nail to keep coveted tax breaks. Yet tax loopholes need to be closed to pay for the corporate and individual tax cuts promised.
The GOP bill would permanently cut the corporate tax rate to 20% from 35%, consolidate income tax brackets for individuals from seven to four and repeal or limits many deductions.
Analysts believe business opposition, combined with concern from Republicans in high-tax states, will make it tough for the GOP to pass meaningful reform by year-end -- the party's latest self-imposed deadline.
The initial reaction from "livid lobbyists" and others suggest it's "farcical" that Congress will enact tax legislation before 2018, Isaac Boltansky, senior policy analyst at Compass Point Research & Trading, wrote in a report.
Here's why some business groups are voicing serious concern about Trump's effort to revamp the tax system:
Big problems for small business: Owners of mom-and-pop shops worry the tax bill doesn't fix a system they feel already favors big business.
The National Federation of Independent Business, which represents 325,000 small businesses in the U.S., wasted little time saying it can't support the tax legislation "in its current form."
"This bill leaves too many small businesses behind," Juanita Duggan, the groups' president and CEO, said in a statement.
Most small businesses are set up as "pass-throughs," meaning their profits are passed through to the owners, shareholders and partners, who pay tax on them through their personal returns. The GOP tax bill slashes the pass-through tax rate to 25%.
However, small business owners fear this won't help the vast majority of them because most already pay taxes at a 25% rate or less.
"This proposal would primarily help wealthy individuals rather than small businesses," according to John Arensmeyer, CEO of the Small Business Majority, another advocacy group.
Housing trouble: While Trump often brags about record highs on Wall Street, the tax plan he endorsed was greeted poorly by the homebuilding stocks.
Toll Brothers (TOL), KB Home (KBH) and other builders tumbled this week because the tax bill would limit key tax breaks that favor homebuyers.
Specifically, the legislation calls for capping the mortgage interest deduction at $500,000 instead of $1 million. It would also limit the deduction for state and local property taxes at $10,000.
The fear, at least in the housing industry, is that these tax breaks could sap demand for pricey homes, especially in expensive markets. Many of those markets, such as San Francisco and Manhattan, are in high-tax states. That's a problem because the GOP tax plan would eliminate state income tax deductions altogether.
The National Association of Home Builders warned the GOP tax plan "slams the middle class" by hurting home values. The group complained that Republicans didn't include its proposal to replace the mortgage deductions with a tax credit.
"This tax reform plan will put millions of home owners at risk," said Granger MacDonald, chairman of the NAHB.
Realtors really mad: The GOP proposal to cap the mortgage interest deduction is also riling up the vast real estate industry.
Echoing the arguments made by the home builders, the National Association of Realtors complained that the plan "threatens home values and takes money straight from the pockets of homeowners."
The concern for realtors is that a slowdown in housing could hurt their income or even employment prospects. It's a major employer. There are about 2 million active real estate licensees in the U.S., according to the Association of Real Estate License Law Officials. The NAR alone represents 1.3 million realtors.
The White House has argued that Americans don't buy homes for the tax breaks, they do it because they feel confident about the economy.
Nonetheless, the tax bill "fundamentally alters the tax benefits of homeownership," according to Compass Point's Boltansky.
Expect the "housing industrial complex fighting ferociously," he said.
Ranking Member Walz: GOP Tax Plan Puts Prosperity Of America’s Heroes At Risk
In a letter to House Ways and Means Committee Leaders, HVAC Ranking Member Walz lists the many ways the GOP tax bill will hurt servicemembers, veterans, and military families.
WASHINGTON, D.C. – Today, House Committee on Veterans’ Affairs Ranking Member Tim Walz (D-MN), Co-Chair of the National Guard and Reserve Components Caucus, sent the following letter to House Ways and Means Committee Chairman Kevin Brady and Ranking Member Richard Neal enumerating the many ways the GOP tax plan, H.R. 1, The Tax Cuts And Jobs Act, will put the prosperity of our active duty servicemembers, veterans, and military families at risk:
The full text of the letter is available below:
Chairman Brady and Ranking Member Neal,
I write today, as Ranking Member of the House Committee on Veterans’ Affairs and as Co-Chair of the National Guard and Reserve Components Caucus, to bring to your attention a number of
provisions in the tax bill under your consideration that impact men and women currently serving in and transitioning from the United States military. Taking up tax reform in the House is a
laudable effort, one that has the potential to bring lasting change to the whole of the American economy. But we cannot allow pursuit of success in that task to come at the expense of hardworking
families, and especially not at the expense of those who have risked everything to serve this country. I hope you will strongly consider the following ways in which these provisions
place the prosperity of America’s heroes at risk before reporting the bill out of Committee.
Sec. 1402. Exclusion of gain from sale of a principal residence.
Under this provision, one’s ability to claim exemption from capital gains on the sale of a home would be limited. To qualify for this tax break, a homeowner must have owned and lived in the home for at least five of the last eight years. However, members of the military often relocate every two or three years in service to their country, with such moves necessitating the buying and selling of homes. At the same time, this provision, coupled with changes in the mortgage interest and state and local tax deductions, are likely to lower home values, which are key vehicles for saving that many veterans and military families have come to rely upon.
Sec. 3404. Repeal of work opportunity tax credit.
The Work Opportunity Tax Credit (WOTC) is available to employers for hiring individuals from certain target groups who have consistently faced barriers to employment. According to data published by the Department of Labor, approximately 80,000 veterans were certified to work under the WOTC in FY 2014 and the current annual rate has grown to more than 100,000 WOTC veteran hires per year. It is clear this program has become more effective in leveling the playing field for veterans with significant challenges in finding work, and has helped to bring the average unemployment level among veterans below the national average. However, veterans between the ages of 18 to 34—in the prime of their working years—still struggle with unemployment at higher than national averages. Cutting the WOTC would further harm this cohort of veterans and roll back gains the overall veteran population has made in finding employment.
The legislation as currently written would also eliminate the “Hire More Heroes” provision, which was passed with widespread bipartisan support in the 114th Congress and celebrated as a
“top GOP priority.” Upon the provision’s enactment into law, former Speaker John Boehner released a statement stating: “[W]e owe it to [veterans] to make sure they have every opportunity
to earn a good living.” I agree this provision has been a valuable source of labor market support for transitioning and injured veterans, and I urge you to develop a solution to drive labor force
participation for these veterans in the future if the credit were repealed.
Sec. 3407. Repeal of credit for expenditures to provide access to disabled individuals.
This provision eliminates the deduction small businesses receive for making their facilities accessible to persons with disabilities. According to a recent statement by Paralyzed Veterans of
America (PVA) on H.R. 1, the legislation “eliminate[s] a critical tool in encouraging compliance” with the Americans with Disabilities Act. As PVA stated, it would be a shame to
undermine years of hard work to make facilities across the country more accessible to people, regardless of ability. In addition, veterans make an outsized contribution to the small business
community with 2.4 million veteran-owned small businesses in this country, employing 5.8 million Americans and generating $1 trillion in revenue each year. Therefore, repealing this
credit will not only harm disabled veterans who are seeking jobs, it will also harm those veteran small businesses owners who are trying to do the right thing by employing disabled veterans and
Sec. 1204 Repeal of other provisions relating to education.
This provision would eliminate the deduction for interest payments on education loans. The success of the GI Bill in bringing veterans into higher education has been one of Congress’s
greatest achievements on behalf of veterans. While the GI Bill often covers much of a veteran’s cost of higher education, it does not always cover everything, and veterans rely on student loans
to make up the difference. This is particularly the case with veterans who are often older when they begin higher education and have more financial obligations such as providing for a family,
which may require financial assistance while attending school. Eliminating this deduction will discourage veterans from pursuing higher education and diminish the overwhelming success of
the GI Bill in educating our returning servicemembers so they may establish careers and firm financial footing for themselves and their families.
Sec. 1303. Repeal of deduction for certain taxes not paid or accrued in a trade or business.
This provision would make changes to the state and local tax (SALT) deduction, repealing tax breaks for payments on income and sales taxes on the state level. The SALT deduction helps
state and local governments fund public services that provide widely shared benefits. For example, County Veterans Service Offices in cities throughout the country are operated locally
and with local tax dollars. The offices provide assistance and technical support to veterans and their families with benefit counseling, rehabilitation referral, obtaining VA loans, applying for
discharge upgrades, requesting military records, guidance on employment rights, and programming for homeless vets. Eliminating the deduction would not only increase individual taxpayer burdens, but also adversely impact local governments from raising sufficient revenue to maintain these services which are so critical to the life of a service member transitioning from the military.
The same is true for resources made available to local education agencies and public postsecondary institutions. In my home state of Minnesota, the system of state colleges and
universities serve more than 10,000 student veterans on average each year. Allocations raised through state and local taxes are vital to the 37 public institutions that welcome veterans, active
military and National Guard members to the classroom every day.
Like many of my colleagues in the House, I stand ready to reform our nation’s tax code and give hard-working Americans a fighting chance at prosperity. I know it is not the objective of this
Committee to harm veterans and members of the military through this tax proposal. However, it should be our foremost priority to consider the unintended consequences that our decisions may
have on the American people and the stability and economic opportunity of those who have served their country in uniform. I hope the Committee will take a sober look at the impact the
provisions of this legislation will have on active duty and reserve service members, veterans, and military families. Thank you for your attention to this matter.
House Committee on Veterans’ Affairs