Tax Reform Preserves LIHTC But Eliminates Bond Funding for Producing and Preserving Affordable Housing
On November 2, 2017, House Republicans released their tax reform legislation – Tax Cuts and Jobs Act – which will make sweeping changes to the U.S. tax code.
The plan takes a historic step in directly revising the mortgage interest deduction, a $70 billion annual tax expenditure that primarily benefits higher income households, including the top 1% of earners in the country.
“The National Low Income Housing Coalition has significant concerns with other provisions in the overall tax bill and further analysis is needed to determine the impact,” said Diane Yentel National Low Income Housing Coalition President and CEO. “We will continue to work with our members and partners to ensure that tax reform efforts do not enrich corporations and wealthy Americans at the expense of people with the lowest incomes.”
The NLIHC has shared this update and has significant concerns with other provisions in the overall tax bill. Further analysis is needed to determine the impact.
- The proposal preserves the Low Income Housing Tax Credit Program,
- But eliminates private activity bonds which are critical to the production and preservation of affordable housing.
- The bill also eliminates the New Market Tax Credit program.
The House bill calls for slashing the corporate tax rate from 35% to 20% and would benefit wealthy Americans by repealing the alternative minimum tax and phasing out the estate tax.
The legislation is estimated to increase the national deficit by $1.5 trillion over a decade. Increasing the deficit in this way will likely lead to deep spending cuts in the future to important domestic programs, including affordable housing and community development programs.
The tax reform legislation proposal makes sensible reforms in lowering the amount of a mortgage against which the mortgage interest deduction (MID) can be claimed to $500,000 for new home loans and doubling the standard deduction.
This change to the MID would impact fewer than 6% of mortgages nationwide and would save an estimated $95.5 billion over the first decade.
However, the legislation uses the savings generated by MID reform to pay for lower tax rates for billionaires and corporations without addressing the affordable housing crisis in America. This proposal is a non-starter.