Tax reform is a topic that comes up every few years and now we’re at the beginning of another possible go-round, but this time it’s a little different because the Senate Finance Committee wants to start from scratch. That’s old news by now. The committee’s “blank slate” approach has been widely talked about in the media. But one thing you likely haven’t heard in the media is exactly how this process is going to play out. There’s certainly been speculation on how it will play out, but it’s safe to say that this approach really creates a novel situation, and it will be interesting for everyone to see what actually happens.
One thing we know is, NAR very much wants to preserve the provisions in the Tax Code that help keep the economy strong by supporting a vibrant real estate market. This week it asked its members to let their senators know they want to keep residential and commercial real estate provisions in the Tax Code. This gives REALTORS® a chance to remind senators just how integral to our economy real estate is.
There are a number of provisions REALTORS® are asking senators to focus on. Among them are the deductions for mortgage interest and property taxes, and the exclusion of home sale proceeds from capital gains taxes (up to $500,000 for a couple filing jointly). The extension of mortgage debt relief is another. That provision excludes debt forgiveness from taxation as income.
On the commercial side, depreciation and 1031 tax-deferred exchanges are among the association’s priorities.
However tax reform plays out this time, you can be sure it’ll be a long process and there will be many twists and turns. And that’s just in the Senate. The House will have its own version (already the chairman of the Ways & Means Committee has held hearings and work groups). You can imagine it will be a very involved road ahead as the two houses write their bills and then reconcile them into something that can go to the president.
Yet within this very long process will be key moments when people must step up and stand behind their interests, and this is one of those times. Senators must know now what provisions are critical for real estate. That’s why NAR is asking its members to contact their senators.
Take action now at the RealtorActionCenter.
To learn more about what’s happening, REALTOR® Magazine interviewed two NAR Government Affairs staffers, the association’s Director of Tax Policy Evan Liddiard and one of its senior legislative representatives, Ken Wingert, in this short video.
If you ever wondered whether getting involved in political activities is worth your time, consider the impact your real estate colleagues Shirley Wiseman and April Newland, among others, have just had on an issue that impacts more than 70 million home owners and the millions of households hoping to buy a home in the coming years.
These two real estate professionals, along with others in real estate who are serving as delegates to the Republican National Convention this year, pushed through language in their party’s platform that explicitly calls for protecting the mortgage interest deduction—this in a year when platform writers are underscoring support for comprehensive tax reform.
The Republican platform four years ago also referenced MID, but it was in the context of a broader set of principles on housing. “Because affordable housing is in the national interest, any simplified tax system should continue to encourage homeownership, recognizing the tremendous social value that the home mortgage interest deduction has had for decades,” the platform said.
But this year—in fact, just yesterday—Wiseman, Newland, and others won approval for language that explicitly puts Republicans on record pledging protection of MID, although it first gives a nod to the party’s priority to seek comprehensive tax reform. If that doesn’t pass, protecting MID is paramount.
“I read the platform and there was nothing in it about the mortgage interest deduction, so I offered that as an amendment,” says Wiseman, president of the McVay Group in Lexington, Ky., and a member of the government affairs committee of the Lexington-Bluegrass Association of REALTORS®. Wiseman is also a past president of the National Association of Home Builders and was an FHA official in the mid-1980s.
The language passed easily after she rewrote her original version to reflect the priority the committee wanted to put on comprehensive tax reform. “I opened my statement with the fact that I submitted this amendment on behalf of the 70 million home owners who depend on the mortgage interest deduction to make it comfortable for them to make their payments,” she says. “This deduction is used by middle America. It came to a voice vote and it wasn’t even close. We won. I think it was one of the most important things to come out of the platform, because it is very significant. It’s very strong language and I am absolutely thrilled.”
April Newland, owner of Newland Real Estate in St. Thomas, Virgin Islands, seconded the motion on Wiseman’s amendment and joined other delegates to help push it to passage. Newland has been a delegate to the Republican convention for decades.
Every single provision in the tax code is fair game as lawmakers next year look at how to put the federal government onto a path to eventual balance. Not even a provision as widely popular on a bipartisan basis as the deduction for mortgage interest can be taken for granted. By getting their party’s explicit endorsement to protect MID, Wiseman, Newland, and their colleagues have notched an achievement that matters to every home owner and buyer. “We need the message out that all politics is local,” says Wiseman. “Get involved at home, then you can pursue state and national. It’s so important.”
By Stacey Moncrieff, Editor in Chief, REALTOR® Magazine
In his State of the Union address Tuesday night, President Barack Obama made scant reference to housing and no mention of the mortgage interest deduction. That was probably a wise move on his part — not only because most Americans favor the deduction and there’s speculation (but no evidence that I know of) that he’ll get behind efforts to reform it, but also because such a mention would have been an odd duck in a speech that set out to inspire a country wearied by economic and political turmoil — and to focus the nation’s attention on jobs.
That said, don’t get too comfortable. During the one-hour speech, Obama made clear his belief that tax reform is critical to reducing the nation’s deficit. Although no significant tax reform legislation is expected to gain traction in 2011 or even in 2012, count on NAR leaders to give new meaning to the term hawk as they keep an eye out for any proposals that could impact housing values and, in turn, hurt local governments.
Opening the State of the Union with a nod to new House Speaker John Boehner (R-Ohio), Obama went on to deliver blunt truths (“Our own engineers graded our nation’s infrastructure a ‘D’“; “America has fallen to 9th in the proportion of young people with a college degree.”); recall the nation’s great triumphs, from the transcontinental railroad to the space program to creation of the Internet; and call on Congress to help foster innovation, improve the education system, and rebuild the nation’s infrastructure. All three are essential to his top priority, he said, which is job creation: “We need to out-innovate, out-educate, and out-build the rest of the world. We have to make America the best place on Earth to do business.”
In the real estate industry, that was bound to be a welcome message since healthy real estate markets depend on a strong job base. Whether Obama’s rhetoric will translate into a lower unemployment rate depends to some extent on how well the Democratic president, Republican-controlled House, and Democratic-controlled Senate work together.
A House United, Somewhat
Both before and after Obama’s speech, commentators talked about the sense of civility — in the wake of the Jan. 8 Tucson, Ariz., shootings — that permeated the chamber. House and Senate members, sitting in an unorthodox arrangement, wore black-and-white ribbons to honor the shooting victims. The family of Christina-Taylor Green attended the event as guests of First Lady Michelle Obama, and Mark Kelly watched from the Houston hospital room, where is wife, Rep. Gabrielle Giffords (D-Ariz.) is being treated.
REALTOR® Magazine Senior Editor Katherine Tarbox was in Washington for the speech, and reported on the civil tone of the evening:
Following from his progress during the lame-duck session, President Obama struck a chord of bipartisanship — and members of Congress got in on the act. For the first time in history, members from opposing parties sat together, applauding as the leader of the free world praised America for its greatness. “Remember, for all the hits we’ve taken these last few years, for all the naysayers predicting our decline, America still has the largest, most prosperous economy in the world,” Obama said.