Focus of Tax Reform Framework on Helping Wealthy with Working Families an Afterthought
On September 27, 2017, the Trump Administration, House Ways and Means Committee and Senate Finance Committee leadership issued a “Unified Framework for Fixing Our Broken Tax Code.”
The ACTION Campaign reports that the framework seeks to lower tax rates, simplify the tax code, bring business back into the US, broaden the tax base and encourage economic growth.
The framework proposes to lower the top corporate tax rate to 20 percent, consistent with the House’s tax reform blueprint released in 2016, and eliminate “numerous” corporate tax expenditures to help achieve the lower rate.
The Low-Income Housing Tax Credit is one of only two corporate tax expenditures that the framework explicitly preserves. The framework notes that the Housing Credit is a tax incentive that has “proven to be effective in promoting policy goals important in the American economy.”
The inclusion of the Housing Credit in the plan is a testament to the proven track record of the program, the need for resources to address our nation’s vast and growing shortage of affordable housing, and the strong bipartisan support that the ACTION Campaign and its members have built over many years.
The framework also notes that tax rules affecting specific industries will be modernized “to ensure that the tax code better reflects economic reality,” providing an opportunity to strengthen the Housing Credit.
The framework is silent on the tax exemption for private activity bonds, which provide critical financing to more than 40 percent of Housing Credit developments in the form of multifamily Housing Bonds. However, it does indicate that “while the framework envisions repeal of other business credits, the committees may decide to retain some other business credits to the extent budgetary limitations allow.”
The plan also features key:
- Corporate tax reforms,
- International tax reforms, and
- Individual tax reforms
The tax reform framework will now be sent to the tax committees in Congress. The expectation is that the details of the framework will be worked out through regular order with the ambitious goal of having tax reform signed into law by the end of the year. Tax reform is still anticipated to advance under the budget reconciliation process, meaning it only needs a majority vote in the Senate instead of the typical 60 votes, but also requires near unanimity among the Republican caucus.
However, to move the bill using reconciliation, Congress must first pass a Budget Resolution providing reconciliation instructions for the tax reform bill. As the health care reform efforts demonstrated, reaching even a simple majority in the Senate can be difficult.
While the framework released today clarifies the priorities of Congressional leadership and the White House, this initial proposal may be changed significantly as the committees work out details.
The coming weeks and months as these details are negotiated will be critical for the Housing Credit and Housing Bonds.
Throughout the tax reform process, the ACTION Campaign will:
- Thank congressional and administration leadership for recognizing the value of the Low-Income Housing Tax Credit,
- Advocate to ensure that the Housing Credit is not only retained in tax reform, but also strengthened and expanded,
- Urge that Congress include the Affordable Housing Credit Improvement Act as part of tax reform, and make additional modifications to offset the impact of a lower corporate rate on Housing Credit investment and subsequent production, and
- Ensure that the tax exemption on multifamily Housing Bonds is retained.
The ACTION campaign will circulate sign-on letter to reinforce these messages to Congress and the Administration. The ACTION campaign works to expand and strengthen the Low-Income Housing Tax Credit.
Looking at the bigger picture around the proposed tax reform framework, the Center on Budget and Policy Priorities reports that like previous Republican tax plans, the newly released framework gives massive tax cuts to corporations and the wealthiest households. The framework offers little for working families with modest incomes compared to what it would do for those at the top.
The top 1 percent of households (those households with incomes above $700,000) would get roughly 50 percent of the framework’s net tax cuts, or roughly $150,000 a year on average.
The plan is far vaguer about changes that affect working and middle-income people, but likely gives them little if any benefit.