As the White House shifts its focus to tax reform, analysts are examining who will benefit from the proposal announced Wednesday afternoon. The New York Times reported yesterday that this week’s stock market surge could be attributed to President Donald Trump’s call to cut the corporate tax rate to 15 percent, from 35 percent. However, the article goes on to note that optimism on Wall Street doesn’t always translate to growth on Main Street.
“We have to distinguish between pro-profit and pro-growth policies,” Diane Swonk, an independent economist in Chicago, told The New York Times. “A pro-profit approach increases the share of the pie going to corporate earnings and shareholders. Pro-growth policies increase the size of the pie.”
Treasury Secretary Steven Mnuchin told reporters today the plan will eliminate all personal tax deductions other than the mortgage interest deduction and those that encourage charitable giving. However, by increasing the standard deduction the plan will effectively nullify the benefits of the MID for the vast majority of filers, something strongly opposed by the National Association of REALTORS®.
More on this subject elsewhere in today’s news: Mendenhall Urges Lawmakers to Keep Incentives for Homeowners
That’s why NAR will be following the progress of tax reform as it becomes more concrete in the hands of Congress, with a specific concentration on how it may impact homeowners, property investors, and real estate practitioners. “REALTORS® support tax reform, and it’s encouraging to see leaders in Washington doing their part to get there,” says NAR President William E. Brown, adding that “as with all things, the devil is in the details.”
While the association appreciates the benefits American taxpayers could reap under sound reform and a simpler tax code, Brown says anything that includes damage to the economic benefits of housing and real estate investment is a nonstarter. He notes that while housing accounts for more than 16 percent of the gross domestic product and more than $3 trillion in investment, American homeowners already pay between 80 and 90 percent of U.S. federal income taxes. Brown added that the MID and state and local tax deductions make homeownership more affordable, while 1031 like-kind exchanges help investors keep inventory on the market and money flowing to local communities.
“Those tax incentives are at risk in the tax plan released today. Current homeowners could very well see their home’s value plummet and their equity evaporate, while prospective home buyers will see that dream pushed further out of reach,” Brown says. “While we appreciate the administration’s stated commitment to protecting homeownership, this plan does anything but.”
Source: Trump Rides a Market Wave, but Business Looks for Results, New York Times (April 25, 2017) and “White House Proposes Slashing Tax Rates for Individuals and Businesses,” New York Times (April 26, 2017)