Republican Tax Reform
"An insult to the intelligence of the American people and an assault on their financial security"
The National Association of Realtors (NAR) has come out swinging against the Tax Cuts and Jobs Act (Tax Reform). In its multiple roles as lobbyist for Realtors, watchdog and advocate NAR has taken issue with some of the provisions of the Tax Cuts and Jobs Act.NAR has taken issue with the cap on mortgage interest deductions in particular since it would have a direct and immediate impact on the economic health of the real estate industry and the nation as a whole.
Recognizing that any industry only does as well as the consumers of its products NAR chose to take a stand on this issue. In their view; the bill will eliminate a benefit that is also an incentive for buying a home. The real estate industry is among the first to be affected by a downturn in the economy and NAR has practively taken the lead to fight against policies that could cause damage. Consider the Great Recession of 2008. After the Bush presidency the nation lost jobs at the average rate of 700,000 per month. As a result the real estate industry went into a deep depression. The Obama $8,000 New Home Buyer Tax Credit (intended to revitalize the real estate industry and lobbied for by NAR) did help, but, people could not take advantage of the program without a job.
The cap on mortgage interest chips away at the affordability of buying a home. That coupled with the state real estate tax deduction helps make homes affordable for the average middle class worker. It is one of the great benefits of buying a home. People have to be able to afford your product. It is one of the reasons Henry Ford paid his workers so well; so that they could afford to buy his cars.
The Tax Cuts and Jobs Act in its current form has the potential to do lasting damage to the real estate industry in many respects. Most economists predict that the real estate industry would be the one industry most damaged by this bill. Home builders would also be hurt disproportionately. One of the benefits of buying your own home is the ability to deduct your mortgage interest payments and real estate taxes from your federal income taxes. The Tax Cuts and Jobs Act caps the amount consumers can deduct on their income taxes.
Other facets of this legislation are also found to be disingenuous by the majority of experts on the subject of tax reform, for example: certain legislators are complaining that the corporate tax rate is too high. In fact compared to corporate tax rates in the other developed nations around the world; the U.S. corporate tax rate stands at the median. Additionally, no corporation pays the full rate as there are plenty of loopholes and deductibles obtained by their lobbyists in order to reduce tax liabilities. Numerous corporations pay no income taxes at all (e.g. GE, PG&E, CMS, Wisconsin Energy).
Corporations will do well under the Tax Cuts and Jobs Act since the bill will cut the corporate tax rate from 35% to 20%. Republicans in Congress contend that lowering of the corporate tax rate would free up money for corporations to create jobs and hire. However, that has not been the case in the past. That idea has never worked and is only an effort to hide the true intent of those tax cuts usually at the expense of the people who buy our homes: the middle class. In fact, these tax cuts are a gift to the wealthy, that they do not need, and our young will have to pay for later on. Previous tax cuts served only to funnel more money to corporate CEOs, Hedge Fund managers and stockholders.
We must consider at the effects of these changes to the economy since there is a direct correlation between the economy and our industry:
- The National Debt (Deficit): Increasing the deficit via the Tax Cuts and Jobs Act's tax breaks for corporations does nothing to secure the future of career real estate professionals. If future generations are burdened with a tax debt due to gifts for the rich and corporations now; the homes market will suffer later.
- Tax Credits for Overseas Jobs: Trump ran his campaign on a platform of bringing jobs back to America. Yet his Tax Cuts and Jobs Act provide tax credits to corporations that create jobs overseas. People with jobs overseas do not buy homes in Brooklyn.
- Tax Increases Through Slight of Hand: Increasing the middle class' taxes (even in the long term) takes money out of the economy and away from consumers that could be used to purchase their homes.
- Trickle Down Economics: Republicans in Congress have stated that this bill relies on Trickle Down Economics to create jobs. Reaganomics, Voodoo Economics, Trickle Down by any other name has not worked in over 40 years. Trickle Down Economics was first introduced during the Reagan administration. Since Trickle Down Economics Americans have experienced a decline in job provided benefits such as medical benefits, matching funds for 401K, tuition reimbursement, etc. The Bush Tax Cuts did not produce promised results either. Since Reagan, wages have remained stagnant while the monies saved from paying workers their worth are redistributed to Hedge Fund Managers, Stock Holders and Senior Executives (CEOs, etc.) which accounts for the extraordinary wealth accumulated by the 1%. The middle class has not realized any real benefit from Trickle Down Economics. It is the middle class that buys the preponderance of homes that the average Realtor sells.
- Cuts to Medicaid and Medicare: How do these cuts affect you as a Realtor? Medicaid and Medicare provide numerous subsidies to hospitals and medical groups allowing them to maintain employee levels and jobs. People with jobs buy homes. Let us not forget the millions of people that are provided healthcare through Medicaid an added humantarian benefit. The economic and physical health of a community is reflected in your success.
- Cap Mortgage Interest Deduction: This bill in its current form seeks to cap the mortgage interest deduction which would eliminate a major incentive for buying your own home.
Nancy Pelosi, House Minority Leader, stated on State of the Union with Jake Tapper on Sunday 11/5/2017 that the Tax Cuts and Jobs Act "is an insult to the intelligence of the American people and an assault on their financial security". She stated that the deficit would, actually, increase by 3 trillion dollars in the next 10 years not the 1.51 trillion that Republican representatives are touting now. She described provisions in this act that would allow for tax credits for corporations that create jobs overseas. She stated that the bill gives tax breaks to the middle class with one hand and takes them away with the other due to the elimination of numerous deductions which has the ultimate effect of increasing taxes on the poor and middle class. Ms. Pelosi also stated that there are provisions in the bill to eliminate 1 trillion dollars from Medicaid and half a trillion dollars from Medicare. Trump ran his campaign on a promise not to touch Medicaid or Medicare.
There have been several proposals on the table for inclusion into this bill provisions that would help southern states like Tennessee and Kentucky while hurting blue states like New York and California such as limiting deductions for 401K plans, eliminating the real estate tax deduction and eliminating the state and local income tax deduction. Too many complaints were heard from congressional members and the proposals were abandoned for now. High tax states like New York and California would suffer the most in this scenario.
Blue states like New York and California are already at a disadvantage in the redistribution of federally collected tax dollars as compared to the distribution of federal tax dollars to southern (red) states. Consider that for every dollar New York State sends to the federal government in taxes we get back 70 cents. California gets back 80 cents for every dollar it sends to the federal government. Tennessee, on the other hand, gets back $1.40 for every dollar it sends to Washington. Kentucky gets back $2.40 for every dollar it sends to Washington in taxes. Blue states are subsidizing red states and the red states use those monies to keep their own state and real estate taxes artificially low. Eliminating the state real estate tax deductions and state and local income tax deductions would further put blue states at a disadvantage that benefits red (Republican) states particularly in attracting corporate residents.
At this time it does not appear that the Tax Cut and Jobs Act will pass. There are a great many adjustments that would have to be made in order to satisfy the many factions in the U.S. Congress. There are the "Deficit Hawks" that scrutinize the effects of every bill on the National Debt. There is the Congressional Budget Office (CBO) which does an impartial (non-partisan) analysis of the bill with particular emphasis on the National Debt. There are those whose interests genuinely lie in the needs of their constituents (yes there are still a few of them around). Each group has its own requirements. This will prove a tough balancing act for Congress.
We must consider that this bill in its current form might just be the hardline from which Republicans have chosen to start their negotiations. Compromises from this point forward would still leave Republicans in a better place closer to their actual goals. Let us not forget that the economy is still working under President Obama's rules intended to lift the economy from the Great Recession of 2008. Although Mr. Trump takes credit for the economy's success as it stands now; he has done, absolutely, nothing for the economy so far. President Obama's efforts are still in effect and have proven very successful as we have been creating jobs at the rate of 150,000+ consistently (without Trump's intervention) every single month since Obama intervened. Raises in the stock markets are superficial and in anticipation of the upcoming tax cuts promised by Trump.
Over the last forty years every time republicans decided to tinker with the economy they have done tremendous damage. Consider that Reagan's Trickle Down Economics caused him to have to raise taxes several times during his presidency, once during his successor's administration and tripled the National Debt. President Clinton managed to leave the nation with a surplus in the National Debt which was quickly squandered by President Bush. Bush's policies and tax cuts brought the nation (and the world) to its knees and caused the Great Recession of 2008. President Obama's policies set the deficit on a course that resulted in the National Debt being reduced gradually. The Tax Cuts and Jobs Act would increase the National Debt by, at least, 2 trillion dollars unnecessarily. Perhaps nothing needs to be fixed. Remember: if it ain't broke; don't fix it.
New York's Democratic Representatives remain united in opposition to this bill. Democratic Party unity in opposition to this bill is not a hard/ fast rule written in stone. There are several Democrats in Congress that have signaled a possibility to work with the president on this bill. Republican members of Congress are, for the most part, in favor of the bill as it produces massive tax cuts for corporations and the rich.
It has been said that Republicans in Congress are trying to pass this bill "with the speed of light in the dead of night" in order to avoid interference from the citizenry.
The Congressional Budget Office has not produced its analysis of the impact of this bill as yet since Republicans in Congress are trying to rush it through with no hearings, no testimony and thoroughly devoid of "Regular Order".
The National Association of Realtors has comprehensive and detailed information on the Tax Reform bill here: NAR Tax Reform
Make your voices heard. The National Association of Realtors is standing to protect the interests of its members. Contact your Congressional Representative and let them know where you stand on this legislative issue. We have provided numerous resources to help you find your representative's contact information and relevant information on where he/she stands on this issue here: N.Y.S. Congressional Delegation.
Don't forget to sign NAR's petition to stop this bill in its current form from proceeding through the legislative process here: Call for Action
More research resources below.. .
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