A tax reform bill that would lower the mortgage interest deduction from $1 million to $500,000, eliminate deductions on moving expenses and severely reduce those on state and local property taxes passed with relative ease in the House of Representatives Thursday afternoon.
Republicans voted in favor of the “Tax Cuts and Jobs Act” 227-205, with every Democrat and 13 GOP members opposing the legislation, setting in motion a likely alignment with a bill now coursing through the Senate Finance Committee that could be brought to a vote within two weeks.
“For the first time in 31 years we are wiping the tax code clean and replacing it with one that is fairer and simpler for everyone,” Representative Devin Nunes, Republican of California and a member of the Ways and Means Committee, told The New York Times on Thursday.
Under the current House legislation, taxes would be slashed by more than $1.4 trillion over the next decade, in part by reducing the corporate tax rate from 35 percent to 20 percent. It would also cut the number of tax brackets from seven to just four and recalibrate the tax code to work similar to an international system already used by foreign nations across the globe.
In New York, New Jersey, California and North Carolina, where taxes are high, Republicans voted against the bill, insisting it hadn’t gone far enough to protect deductions on state and local taxes. The House bill caps property tax deductions at $10,000 while the Senate bill eliminates them entirely.
“I just have too many constituents who are going to see their taxes go up,” U.S. Rep. Lee Zeldin, of Long Island, told The Times on Thursday. “You’re taking more money from a place like New York in order to pay for deeper tax cuts elsewhere.”
For real estate industry trade associations, both bills have raised concerns over numerous proposals — not least of all the limit placed on the mortgage interest deduction — that would either significantly raise taxes on middle-class homeowners or provide fewer cuts than for taxpayers who rent.
On Wednesday, National Association of Realtors Senior Policy Representative Evan Liddiard cited limits to a popular tax code provision that allows homeowners to exclude gains on the sale of a principal residence, the dilution of the Low-Income Housing Tax Credit and the repeal of student loan interest deductions and moving expense deductions as hurtful to homeowners.
“This is an assault on housing,” said Liddiard. “This tax reform bill is bad news, especially for residential real estate — especially for home-owning families — and it should be defeated.”
Following the vote, NAR President Elizabeth Mendenhall issued a statement, calling on Senators to reassess their own version of the bill before an upcoming vote.
“It’s disappointing to see this legislation move forward, but the real work to shape this debate is just getting started,” said Mendenhall. “Realtors will now look to the Senate as we make our case that the tax reform proposals pending before Congress overwhelmingly remove the tax incentive to purchase and own a home in America. This is about much more than a cap on the mortgage interest deduction. Rather, it is about whether homeowners will have the rug pulled out from under them with a tax system that suddenly favors renting over owning in a big way.”
California Association of Realtors (C.A.R.) President Steve White also issued a statement expressing the trade organization’s “disappointment” with the passage of the bill and thanking the members of California’s Congress who opposed it.
“This bill is simply a direct attack on California housing and homeownership,” White said. “Eliminating the incentive for people to buy homes and raising taxes on hundreds of thousands of California homeowners only puts the American dream further out of reach. We support fiscally responsible tax reform but lowering corporate taxes on the backs of middle-class families would be catastrophic.”
The Senate’s version of the bill, meanwhile, suffered a setback Thursday when the Joint Committee on Taxation, a bipartisan agency, reported that taxpayers earning less than $40,000 would be slapped with higher taxes, a finding that undermines GOP claims that the bill would help low-income families.
Editor’s note: This story has been updated.
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