Mortgage Deductions and the Prospects for More Affordable Housing

New Orleans   The Republican tax bill is all over but the shouting, and that will last for a long, long time. Given the unpopularity of the bill in all of the polls, it will reverberate into the 2018 midterm elections, possibly flipping control of Congress, and likely will still be an issue for many in 2020 as well. Given the complexity of the bill and the last minute, slapdash nature of some of the amendments, it will take a bit of unraveling before the full measure of its likely impact will be known.

One of the big headlines has to do with ratcheting down the mortgage interest deduction. For low-and-moderate income families, that’s an interesting issue. Last check, the conference split the difference between allowing it up to one-million for a new home in the Senate version versus a half-million in the House version, at $750,000 as the ceiling. For the vast majority of low-and-moderate income families around the country, there will be no impact at all. In fact the fears that topping off the deduction will lower prices on the coasts is probably good news for such families if there is some housing deflation for a change that trickles down.

In normal times, shrinking the mortgage interest deduction would be great news. In writing, Citizen Wealth, I was shocked at how much of the so-called social welfare segment of the federal budget is given to the lost tax revenue from this deduction, especially since so much of the benefit is skewed towards wealthier families buying more expensive houses more easily, and therefore harvesting the greater part of the benefit. It was hard not to advocate cutting the deduction in order to beef up other social welfare benefits for poorer families. Unfortunately, the Republican tax bill is doing the right thing for the wrong reason in transferring the increased tax revenue to a decrease in taxes for corporations and the superrich. Opportunity lost. When the pendulum swings back on taxes in the future, hopefully the deduction won’t change much, and the redistribution will be more equitable than in the time of Trump.

Analysts argue that housing developers get some benefits in pass through provisions that benefit Trump and his family and others. All of this should mean that more rental units are constructed. Sadly, without incentives for affordable housing developers, the new units, though much needed given the shortages in so many cities, will likely be market rate, and not wildly helpful in meeting the huge affordable housing crisis in the country.

An unanswered question and potential outcome of this tax bill, as I look for a silver lining, might be in helping move the economic culture away from the white-picket fence of home ownership to increased programs for stable, long-term tenancy and what those units and communities will require. Maybe, just maybe, that will force the question of affordable housing and even public housing higher on the policy and budgeting agenda and allow home ownership desires to extend more towards rehabilitating the vast stock of abandoned housing and infill lots in many cities in urban America.

Hope springs eternal.

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Anyone Who Claims to Know What’s In the New Tax Bill is Lying

Susan Collins from Maine (AP Photo/J. Scott Applewhite)

Memphis  In a frenzy of wheeling and dealing, the Republicans in the US Senate passed something called a tax bill that seems to have been a grab bag that certainly included taxes, but also was filled with a mixed assortment of body parts, wish lists, and IOUs that may or may not ever be able to be collected by anyone. There is only one thing that is clear: anyone who says they know what the new tax bill is going to be is lying.

I can say that with confidence even far away from Washington, D.C. and the halls of Congress for a list of reasons. The biggest, fattest one is that the Senate amalgamation has to conference with the House bag of tricks in order to try to negotiate one bill that can actually get a full vote of Congress and become the law of the land. One could call this horse trading, except that people are on the auction block, not horses, which makes the whole process even scarier.

This won’t be easy, and it will be messy, but don’t confuse that with the old saw about watching sausage and democracy being made. This is not a democratic process. People will have a lot to say, and their will be a reckoning, but that’s much later down the line while the pain is still fresh.

One of the interesting things to watch will be what happens to the odd body parts that were tacked on this bill for the Republicans in the Senate to reach 50-votes. For example, Senator Flake from Arizona got a promise in the bill for his vote that Deferred Action immigrants or Dreamers will be dealt with fairly. The House Republicans will grind that one down pretty fine. Senator Collins from Maine got a gift bag of goodies for her vote that included a tax deduction of up to $10,000 for state and local property taxes as opposed to a full repeal. She also got something of a continuing deduction for lower income families for medical expenses, but the details are not unclear, rather, they are completely unknown.

The mystery is not limited to some of these weird odds and ends, many of which are profound, like the repeal of the mandate for participation along with penalties in the Affordable Care Act, because the 500-page Senate bill’s ink was hardly dry in time for the vote. There were literally hand scribbled amendments because of the last minute nature of some of the deals, as they voted. To say that none of the Senators, on either side of the aisle, knew what they were voting for would be too kind.

The Republicans knew what mattered. They were going to give the largest gifts in the bill to big corporations and their rich donors. At this point that is one of the only certainties as this bill now gets into the grinder between the House and the Senate. The other is that at the end of this process, all of us will personally help pay for these tax cuts for business and the wealthy.

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Please enjoy I Left My Body by They Might be Giants.

Thanks to KABF.

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