Affordable housing advocates are troubled by what little they can see in President Trump’s one-page tax reform plan, released Wednesday. And they have ideas on how he can improve it.
The plan, among other things, would keep deductions for home loans and charitable giving; double the standard deduction taken by those who do not itemize deductions on their tax returns (often, those who do not own homes or whose home loans are paid off do not itemize); eliminate deductions for state and local taxes, the inheritance tax on multimillion-dollar estates and a 3.8% tax on investment income; get rid of the alternative minimum tax; reduce the number of personal income tax brackets and reduce the corporate tax rate from 35% to 15%.
The proposal, however, doesn’t detail how it would offset the income lost due to the tax cuts.
“Trump’s advisers argued that the plan will pay for itself through economic growth,” according to an article in the Los Angeles Times, which noted that most economists do not agree.
LeadingAge is taking a wait-and-see attitude, mainly because there’s not much to see at this point, the organization’s director of housing policy and priorities, Linda Couch, told McKnight’s Senior Living.
“There is a big tax cut for lots of entities and income groups, but where’s the pay-for? That’s the big question,” she said.
The group is worried about the potential for “further bleeding of nondefense discretionary programs and cuts to entitlement programs,” Couch said.
“We’re all for lower taxes, but at some point, we need a certain amount of taxes to keep the programs that protect older adults,” she said.
Spending related to assistance with housing, healthcare, food and energy “is already lower than we know it needs to be,” Couch added. “Having some balance with some tax cuts and some revenue-raisers? That would be reform.”
National Low Income Housing Coalition President and CEO Diane Yentel called the tax proposal “a missed opportunity to re-prioritize and rebalance federal housing policy.”
Increasing the standard deduction, she said, would lead to fewer households claiming the mortgage interest deduction.
“Without additional reforms to provide a greater tax benefit to low- and moderate-income homeowners and to reinvest the savings into providing affordable rental homes to those with the greatest needs, Mr. Trump’s proposal would amplify the mortgage interest deduction’s regressive effect; only the wealthiest Americans would benefit,” Yentel said in a statement.
The president and Congress should reform the mortgage interest deduction, the NLIHC believes, by reducing the amount of a mortgage eligible for a tax break from $1 million to the first $500,000 and converting the deduction into a credit, which the group says would create a new tax break for 15 million low- and moderate-income homeowners who currently do not benefit from the deduction.
“This would result in $241 billion in savings over 10 years to be reinvested into critical rental housing solutions, like the national Housing Trust Fund and rental assistance, for families with the greatest needs — not to pay for lowered tax rates for billionaires and corporations,” Yentel said.