The Senate passed legislation Thursday that would provide billions in tax cuts for home builders, banks and other businesses hit by losses in the housing downturn and a smaller amount of assistance for state and local governments and individual homeowners.
Although the 84-12 vote to approve the Senate bill appears to lessen the threat of a veto by the Bush administration, the House of Representatives is considering competing legislation that would provide more help for individuals but no tax breaks for businesses.
The bill approved by the Senate, the Foreclosure Prevention Act of 2008, was a compromise which did not include a controversial provision to allow bankruptcy judges to reduce the principal on troubled borrowers’ mortgages.
The Bush administration and the lending industry opposed giving bankruptcy judges the power to force "cram downs" of loan principal on lenders, saying it would raise the cost of borrowing for all homeowners.
Maude Hurd, national president of the Association of Community Organizations for Reform Now (ACORN), called for lawmakers to give bankruptcy judges cram down powers as they consider additional measures to address rising foreclosures.
"We know that many Senators will send out press releases trumpeting today’s final passage, but the reality is that more families will be threatened with foreclosure the day after this passes than the day before. The ‘Foreclosure Prevention Act’ is a misnomer and an insult to struggling families," Hurd said in a statement.
Senate Majority leader Harry Reid, D-Nev., said the bill was "not perfect" or a "magic bullet that will solve the problem" of foreclosures. But he said the bill is a first step, and noted that provisions to modernize Federal Housing Administration (FHA) loan guarantee programs include a permanent increase in FHA loan limits to $550,000.
The bill would allow homeowners to claim a standard property tax deduction of $500 for single filers and $1,000 for joint filers. The tax code currently allows only those who itemize deductions to deduct state and local property taxes from their income.
The bill would also create a $7,000 tax credit to be claimed over two years for home buyers to purchase a property in foreclosure.
Although the Bush administration is on record as opposing tax credits for those who buy foreclosed homes or a permanent standard property-tax deduction, Reid downplayed the threat of a veto now that the bill does not include cram down provisions.
"President Bush has announced his support for FHA modernization. Democrats and Republicans in Congress agree that it is the right thing to do for American families. This bill will achieve that crucial and bipartisan goal," Reid said in a statement.
The Laborers’ International Union of North America, which opposed "carry-back" provisions that allow home builders and other companies to apply losses from 2008 and 2009 to taxes they’ve paid in the last four years, said the bill would "use taxpayer money to pay for corporate home builders’ reckless and unethical behavior."
LIUNA claimed the bill would provide $25 billion in tax breaks to businesses through 2010, compared to $9 billion in tax breaks for homeowners.
"While there are provisions in the bill that will address the needs of homeowners, the bulk of the bill’s spending is taken up with a multi-billion dollar handout for corporate home builders and those on Wall Street who helped cause the mortgage and housing crisis," the group said in a statement.
The House Committee on Ways and Means Wednesday signed off on a competing bill, the Housing Assistance Tax Act of 2008, which does not include carry backs for businesses, but would provide tax credits to first-time homebuyers, improve access to low-income housing, and allow families to deduct property taxes, among other provisions.
The National Association of Home Builders said both the House and Senate bills have their merits, and urged lawmakers to include a temporary tax credit for the purchase of a home in whatever compromise bill is reached.
"Enacting a broad, temporary tax credit for the purchase of a home would provide the best stimulus for housing and the economy," NAHB Chief Executive Officer Jerry Howard said in a statement. "We urge House and Senate lawmakers to keep this in mind as they move to bridge their differences and enact into law the best possible bill to help distressed homeowners and to jump-start housing and the economy."
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