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Federal Tax Reform

Tax Reform can affect renters in many ways. 
RHINO welcomes your contributions to the discussion.

What are the housing related issues?

  • Low Income Housing Tax Credits
  • Home Mortgage Interest Deduction
  • Housing Subsidy entitlement
  • National Housing Trust Fund
  • Carbon tax and Energy Burden benefits (see below)
  • Renters Tax Credit  For some time, the Center for Budget and Policy Priorities has been floating the idea of a renter's tax credit as a complement to the mortgage interest deduction for homeowners.  Now they are touting the idea as a complement to the Low Interest Housing Tax Credit that supports investors in "affordable" housing developments.  Call me cynical, but all this manuvering seems to be a way help justify existing housing benefits for upper and middle income taxpayers by adding a morsel for moderate income renters.  All to say that Tax Reform (if/when it comes) will have big housing impacts no matter what happens.  RHINO will be watching...but everything now seems to be in the manuvering stages.  Senate report here.

 Federal Spending rigged against renters

Federal Housing Benefits Tilt Toward Higher Income Homeowners and Leave Struggling Renters With Less.

The Center for Budget and Policy Priorities reports that Federal support for renters come up short when it comes to support. “The federal government spent $270 billion in 2012 to help Americans buy or rent homes, but little of that spending went to the families who struggle the most to afford housing.” Federal housing spending is unbalanced in two ways:

  • Federal programs target a larger share of subsidies on higher-income households and

  • Federal programs favor homeownership over renting.

Low-income renters are far more likely than homeowners or higher-income renters to pay very high shares of their income for housing and to experience problems such as homelessness, housing instability, and overcrowding.” Here are the charts:

Tax Reform could include a Republican carbon tax that rebates to low income utility consumers.
This is a long shot, but some Rs are in favor of a tax-based carbon regulation rather than a cumbersome regulatory regieme. They are also convinced that a carbon tax should be "revenue neutral," that is: proceeds go back to consumers in the form of credits. If such a scenario were possible to enact, one good way to rebate the carbon tax revenues would be to underwrite utility savings for low income households with a utility burden. More on Rs and carbon tax (from "The Hill") "Catrina Rorke, director of energy policy, R Street Institute. Rorke has become a champion of a controversial idea: that taxing carbon dioxide emissions is a conservative solution to climate change. It’s a challenging case to make, because most Republican policymakers dispute that humans significantly contribute to climate change. But Rorke sees a carbon tax as one of the few palatable options for Republicans who want action to mitigate global warming. 'Lately, we’ve seen an increasing appetite from Republican politicians for solutions to a changing climate, to environmental issues that are affecting their communities,' Rorke said. 'They’re not seeing excellent solutions coming out of the right. They’re seeing discouraging solutions coming out of the left, and it’s a take-it-or-leave-it proposition for them.' ” Rorke got her start in the field as a fellow in the office of then-Rep. Bob Inglis (R-S.C.), who lost his 2010 election due in part to his endorsement of a carbon tax."

What's news?
October 13, 2017 Mortgage Interest Deductions helps richies, not low income.
     Columbus Dispatch proclaims "Study: Housing programs help wealthy more than poor" based on a new study from Apartment List newsite. 
     The study is even better than the Dispatch article. Apartment List study shows that the cost of Mortgage Interest Deduction far exceeds the benefits provided by Housing Choice Vouchers. 
In other words, homeowners get far more Federal housing subsidy than low income renters.

September 26, 2017 FIRED moves into action to save mortgage interest deduction (MID)
     Y'know that President Trump AND National Low Income Housing Coalition (for different reasons) may want to reduce/eliminate the home mortgage interest deduction. President Trump believes that the savings from eliminating "loopholes" can be used to reduce overall tax rates. NLIHC believes that savings from MID caps can free up funds to support the National Housing Trust Fund which supports affordable housing development. 
     PRI's Marketplace reports on efforts by the Finance,Investment,Real Estate,Developer industry to protect MID from tax reformers. It's a nice profile of how lobbying works in DC.

April 18, 2017, EITC and Tax Reform
Brookings analyzes the Earned Income Tax Credit program. "The Earned Income Tax Credit and the white working class. "As another tax filing season draws to a close, the looming tax reform effort promised by President Trump stands to spark yet another round of contentious debates on Capitol Hill. Given the stark and deepening partisan divides in Washington, it’s hard to believe that tax policies with bipartisan support exist."

January 31, 2017, The Hill, Bet on a tax cut, not tax reform
President Trump and congressional Republicans are barreling ahead with what is likely to be the biggest U.S. tax legislation in decades. But will it be tax reform? Or a tax cut? They are not the same thing. And the difference matters to everyone who pays taxes or cares about the U.S. economy. Let’s start with—pardon the pun—a short taxonomy. Tax reform is a broad restructuring of the system the government uses to collect revenue. A tax cut is, well, a tax cut.

December 31, 2016, City Lab, Julian Castro on impact of Tax Reform on Low Income Housing Tax Credits (LIHTC)
"...LIHTC is an indispensable tool to create more affordable housing opportunity out there. It’s needed more than ever. Every year, about 100,000 affordable housing units come up because of LIHTC. I won’t guess at what kinds of tax reform may or may not succeed, but I will say three things. Your question underscores the need for any tax reform to be done in a way that is thoughtful about the impact to LIHTC and the housing market. Secondly, it underscores the need for states to be smart about their QAPs, their qualified application {sic} plans. There is a lot of work that can be done at the state level to get more bang for the buck out of LIHTC, if states are smart about their QAPs. And then third, it highlights some of the importance of the work that we’ve gotten done with LIHTC. Specifically I’m thinking of DDAs, or Difficult Development Areas—basically going to a more nuanced application of a LIHTC boost by ZIP Codes or census tracts instead of whole areas, and truly giving a boost where it’s more difficult to get an affordable housing project done. That kind of nuanced work is going to be more and more important so LIHTC does retain its value.

April 7, 2016 Marketplace The only way to stop inversions might be tax reform

January 07, 2016 The Hill A realistic gambit on tax reform
Everyone knows the current federal tax code is a complicated mess. It is full of targeted tax preferences, deductions, credits, and loopholes, while at the same time it is plagued with high marginal rates. The status quo is a good arrangement for lawyers, accountants and lobbyists, but it has hamstrung the broader economy. From tax reform during the Reagan administration to a recent iteration authored by former Senate Finance Committee Chairman Max Baucus (D-Mont.) and former House Ways and Means Committee Chairman Dave Camp (R-Mich.), all serious proposals begin from the simple premise of eliminating exemptions, deductions and credits while lowering marginal rates. That is the crux of every Republican presidential candidate’s tax plan, virtually all of which would be superior to the status quo. [ ] Current law provides that married couples filing jointly can deduct the interest they pay annually on the first $1 million of mortgage debt for principal residences and second homes ($500,000 for individuals and married filing separately). Rubio’s tax plan, authored with Sen. Mike Lee (R-Utah), would limit the deduction to the first $300,000 of the debt used to acquire a residence. Meanwhile, Cruz’s tax plan would cap the mortgage interest deduction for the first $500,000 on the acquisition debt. Each plan would more than offset the loss of a portion of the deduction with tax cuts elsewhere in the code. Along with creating a more efficient tax code, Rubio and Cruz’s plans to limit the mortgage interest deduction have the added benefit of helping to stabilize our broken housing finance system that was badly exposed during the 2008 financial crisis.

1/11/16 Wall Street Journal.  GOP House Chairman Promises Tax Code Revamp in 2017

1/7/15 Sen. Sherrod Brown proposes letting low-income workers tap tax credits early to avoid payday loans
U.S. Sen. Sherrod Brown on Wednesday proposed an alternative to payday loans that would allow low-income workers to claim part of their Earned Income Tax Credits when they need a cash boost.

7/16/14 Middle Way.There are a lot of ideas floating around...and no prospect of action before 2016, but..."The venerable mortgage interest deduction has passed its hundredth birthday and generated a debate that may last another hundred years." on Mortgage Tax Deduction Aims to End Homelessness

While on the subject of Tax Reform.Ohioans are taking the lead in making Low Income Housing Tax Credits "permanent" rather than subject to annual renewal along with other tax credits. More here

Federal Tax Credit for Renters?
 Rep Charles
Rangel has introduced HR 4479 which would create a tax credit for tenants who pay more than 30% of their income for rent. 

Notes & Links

Subpages (1): Renter Tax Credit