The GOP Tax Plan And The Housing Market
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The Republican tax plan that was released yesterday is being sharply criticized by home-builders and realtors. They say the plan could discourage home buying and also push down home prices. Here's NPR's Chris Arnold.
CHRIS ARNOLD, BYLINE: Republicans say the new tax plan will simplify the tax code and give the typical American family of four nearly $1,200 in their pocket.
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PAUL RYAN: That will help you put more money away for college. It will help you save for retirement. We're making things so simple that you can do your taxes on a form the size of a postcard.
ARNOLD: Speaker Paul Ryan had a tax form the size of a postcard and waved it before the cameras yesterday. But Jamie Gregory with the National Association of Realtors says it's not that simple.
JAMIE GREGORY: It will be bad for middle-class homeowners all across the country.
ARNOLD: Gregory says there are a lot of moving parts that make it not simple. The plan would block you from writing off your state and local income tax. Property tax write offs would also be capped. Meanwhile, the standard deduction would be bigger. And all that taken together would mean that it wouldn't make sense anymore for most homeowners to itemize, and so very few would get the mortgage deduction tax break.
GREGORY: It takes away the incentive to own a home. For the vast majority of America, you're making no difference between renting and owning.
ARNOLD: Gregory says his group is still crunching the numbers to figure out who the winners and losers would be. And he thinks while some homeowners will pay less taxes, some, he says, might pay more. Gerry Howard is the CEO of the National Association of Home Builders. He is not happy either.
GERRY HOWARD: It is an assault on housing.
ARNOLD: Howard says with smaller tax savings tied to homeownership, that will lower the demand for houses and prices will fall. So Howard says even if that family does save $1,200 on their taxes...
HOWARD: The same American family also needs to look at its net worth. And if the value of your largest asset - your house - is declining, see if you're really better off.
ARNOLD: OK. But would home prices actually drop? We ran this past Chris Mayer. He's a housing economist at Columbia University.
CHRIS MAYER: In relatively high-income, high-tax-rate states, i.e. blue states, we're likely to see home prices drop a reasonable amount.
ARNOLD: He says less so in the middle of the country. And as a policy shift, as far as the government promoting homeownership with the tax code...
MAYER: This is a very big change for the country. The thing that had Presidents Clinton and Bush and Reagan all in the same camp was tax policy that had supported homeownership.
ARNOLD: Still, Mayer and many other economists have long said that the mortgage interest deduction is problematic. It favors wealthier people who get to write off more money. Working-class or young families right on the edge of being able to afford a house - they don't save much, if anything. Len Burman is an economist with the Tax Policy Center. He says not many people buy homes because of the tax break.
LEN BURMAN: People want to own their homes. They want to have something that is theirs that they can fix up that they don't worry about a landlord kicking them out of it.
ARNOLD: Burman thinks that home prices probably would decline a bit under the plan. He says that might actually be good for some first-time homebuyers. But he and Mayer both say that if the government wanted to promote homeownership, it could do it with a better incentive than the mortgage deduction - say, a tax credit that didn't favor rich people. But that is not part of the Republican's tax plan.
Chris Arnold, NPR News.
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