Today, National Economic Director Gary Cohn and Secretary of the Treasury Steven Mnuchin announced the Trump Tax Proposal, outlining what Cohn called a “once in a generation opportunity.”
Cohn said the primary objectives are to simplify the system, lower rates, and make the system fair (particularly for lower to middle income citizens who have “been left behind by the economy”), in an effort to create economic growth, believing that under this plan, America can get back to a 3.0 percent GDP “that’s sustainable.” He also noted that a primary goal is to eliminate breaks for special interest groups.
Citing loopholes that have “disadvantaged the average American” and tax rates that have pushed money outside of the U.S., personal and corporate tax reform were proposed with the assertion that this proposal still has many details to be fleshed out as it is sent to the House and Senate to become a bill.
Personal tax reform, protecting the MID
Regarding personal tax reform, Mnuchin conveyed that in 1935, citizens filled out a one page tax form with two pages explaining the 34 lines. Today, there are 199 tax forms that take seven billion hours a year to comply with, and Mnuchin says 90 percent of personal tax filers need help filing.
So the Trump administration believes the following will simplify the system:
- Seven tax brackets will become three (10%, 25%, and 35%).
- Doubling the standard deduction (“a zero tax rate on the first $24k a couple earns,” says Cohn).
- Tax breaks for child care costs.
- Repealing several taxes (Alternative Minimum Tax, 3.8 percent “Obamacare tax,” as they called it, and the estate tax).
The non-negotiables for the administration were protecting charitable giving and the mortgage interest deduction (MID).
We’ve written endlessly on the MID, how it is critical to homeownership, and how the National Association of Realtors (NAR) has tirelessly fought to protect the deduction.
Corporate tax reform
Secretary Mnuchin outlined the corporate tax reform proposal, citing the objective as making American business “the most competitive,” and asserting that the plan will return trillions of dollars from offshore to purchase capital and create jobs. Although they’re still working out the details on entrepreneurs and independent contractors like Realtors, Mnuchin continues to say that small to medium businesses (and assumably LLCs) will be eligible for the business rate.
The Trump Tax Proposal for corporate taxes includes the following:
- Wildly slashing the top tax rate for all businesses to 15 percent.
- Moving to a territorial tax system.
- No border tax adjustment.
- A one-time tax on overseas profits.
As real estate practitioners, most of our readers will care most deeply about the top tax rate which is 20 percent below today’s top corporate tax rate, and huge news for self employed people (like Realtors) who currently pay a top tax rate of nearly 40 percent.
NAR continues to fight for the MID
NAR has expended an enormous amount of effort into protecting the MID for many, many years. And while the MID was one of the only non-negotiables of the proposal, NAR President William E. Brown says Trump’s proposal comes “at the expense of current and prospective homeowners,” even though “major reforms are needed to lower tax rates and simplify the tax code.”
NAR appears to be the biggest winners of the fight to protect deductions (nay, the only non-charitable winner), but Brown said in a statement, “The mortgage interest deduction and the state and local tax deduction make homeownership more affordable, while 1031 like-kind exchanges help investors keep inventory on the market and money flowing to local communities,” stating that those tax incentives are now at risk (although Cohn cited the MID as one of the only protected deductions that will remain).
“Current homeowners could very well see their home’s value plummet and their equity evaporate if tax reform nullifies or eliminates the tax incentives they depend upon,” said Brown, “while prospective homebuyers will see that dream pushed further out of reach.”
What NAR didn’t say in their statement is that yes, the MID is protected under this proposal, but the unpredictability of this President’s negotiation methods means it’s vulnerable until the ink dries on a bill that protects the MID.
So the fight is still on and they’re going to continue the tradition of pushing to protect the MID. Vigorously.
Concluding, Brown said that Realtors® support tax reform, “and it’s encouraging to see leaders in Washington doing their part to get there. We believe tax rates should come down to the degree that sound fiscal policy allows, and simplifying the tax code will help ensure fairness and transparency for individual taxpayers.”
Two out of four major objectives down
Mnuchin says the overall economic plan consists of four parts: Tax cuts, tax reform, regulatory relief, and renegotiating trade deals. Today’s proposal, if it becomes a successful bill, knocks down two of the four stated pins.
People paying nearly 40 percent in taxes (aka most of our readership) could potentially be getting a large raise. If the MID is ultimately protected, current and future homeowners can rest easy. But as NAR points out, there are some real-estate related incentives like 1031 potentially on the chopping block.
Politicians on both sides have long called for a simplification of the tax system, but getting all to agree on what that looks like is no easy task, so the turns this proposal takes as it is transformed into a bill will be quite interesting.
When a WWII vet returned home and was denied fair housing, the course of history forever changed
Did you know that Fair Housing was inspired by a vet who volunteered his life to defend our nation, only to come home and be denied housing? What has happened since legislation was enacted and what is going on today? NAR CEO Bob Goldberg weighs in.
April marks the passage of the Fair Housing act of 1968, which the REALTOR® population commemorates, recomitting to expanded equal access to housing. Offering more texture to the ongoing fair housing challenge in America, the following editorial is penned by Bob Goldberg, CEO of the National Association of Realtors®, America’s largest trade association:
The legislation was going nowhere. At least not in a form that would have done much good.
Following months of debate amid nationwide unrest, the version of H.R. 2516 that cleared the U.S. House of Representatives was diluted and largely impotent.
Then it waited – idle – in the Senate for the remainder of 1967.
When the upper chamber eventually (reluctantly) took up the bill, the junior Senator from Massachusetts took the floor. Edward Brooke then told a story that’s as powerful today as it was 54 years ago.
Enlisting in the United States Army immediately after Japan’s attack on Pearl Harbor, Edward Brooke was assigned to the segregated 366th Infantry Regiment and soon entered into European Theater from the unit’s outpost in Italy. There, Brooke’s fluency in Italian was a tremendous asset to Allied war efforts, his covert actions in Axis territory earning a Bronze Star Medal for service in a combat zone.
He returned home a decorated veteran, a member of the group that would reverently be known as America’s “Greatest Generation” for its defeat of fascism and its persistence through the Great Depression.
Yet Brooke, who would become the first Black American popularly elected to the U.S. Senate, found himself denied the ability to compete for certain homes in certain neighborhoods because of the color of his skin.
“In the hierarchy of American values, there can be no higher standard than equal justice for each individual,” Brooke said in the winter of 1968. “By that standard, who could question the right of every American to compete on equal terms for adequate housing for his family?”
For Brooke, with his new wife and a blossoming family, the experience was devastating. But it was far from unique. Even for those returning as heroes from Europe and the Pacific.
While the GI bill promised to repay American soldiers for their immense sacrifices in World War II, many of those benefits were in truth only promised to White veterans.
“Here we were… fighting for freedom overseas when we did not have freedom at home. We had hoped and prayed that when the war was over… things would [be] different,” he said years later. “But when we came back, it was just business as usual.”
The encounter prompted Brooke to enroll in law school at Boston University, setting him on the path to public service.
With redlining pervasive in post-World War II America, historian Ira Katznelson notes that non-whites purchased “fewer than 100 of the 67,000 mortgages insured by the GI bill” in suburban New York City. Across 1947 Mississippi, just two of more than 3,100 VA-guaranteed home loans went to Black borrowers.
Something, it was clear in Brooke’s mind, had to change.
“Fair housing [was always] a problem for me,” Brooke recounted in 2007. “I lived in a time when you had redlining, where Blacks couldn’t get mortgages in certain areas… And I just believed that something had to be done dramatically, but effectively, to bring about fair housing in this country. So, I introduced legislation.”
Today, Brooke and Walter Mondale are recognized as the fathers of fair housing.
Together, these Senators from opposing parties and divergent backgrounds drafted S. 1358, the Fair Housing Act of 1968. Its language would eventually be adopted into the same H.R. 2516, legislation known officially as the Civil Rights Act of 1968. This initial bill had been watered down so much through House debate that its only real, remaining purpose prior to the adoption of S. 1358 was to protect civil rights workers.
As I outlined back in February, the assassination of Dr. Martin Luther King, Jr. catalyzed Congress into final, definitive action on housing, applying the public pressure and motivation lawmakers needed to move the Fair Housing Act from proposal to policy.
But it was Senator Brooke’s powerful experience as a Black veteran denied the inalienable right to property that helped birth the landmark law we now celebrate each April.
This fight for equal rights and equal access throughout society persists in various forms, overt and obscure. In employment and education and health care. And, still, in housing.
Today, Realtors® and real estate agents play a unique role in the realization of the Fair Housing Act. The 1.5 million members of the National Association of Realtors® are on the front lines with consumers — both buyers and sellers — and see firsthand where discrimination is experienced.
Back in 2019, NAR began developing an implicit bias training video to share with our members and other industry professionals. This resource drew upon the latest scientific research to illustrate how our brains’ automatic, instant association of stereotypes causes us to treat different groups of people unfairly. The video has today been viewed by tens of thousands of Realtors®.
Building off its success, NAR earlier this month unveiled a new implicit bias classroom training program, which is eligible for state-level continuing education credit. (To maintain real estate licensure, agents and brokers are required by their respective state’s real estate commission to regularly complete a pre-determined amount of continuing education hours.)
The training explains how our unconscious brains immediately categorize people in the human effort to process information more quickly.
It then offers participants various tactics to help break down stereotypical thinking, ultimately allowing each client and consumer to be treated with an equal level of concern and respect.
NAR invited many of the most experienced trainers already engaged with At Home with Diversity® to complete the intensive, two-day certification process requisite to leading Realtors® through the program.
Ultimately, our hope is that this effort will raise the bar on the overall quality and expectations of fair housing training in this country.
But making housing fair in America requires so much more than a focus on implicit bias, a fact NAR recognizes well.
In his memoirs, Senator Brooke wrote that “the issue of open housing went beyond politics and asked white America to cast off prejudice… and to embrace justice for all.” He knew that justice, true justice, was not possible without true fair housing in America.
Edward Brooke laid his life on the line to preserve the principles of freedom, democracy, and justice. His experiences — his story — remain a critical component of our broader, national story. And it’s a constant, explicit example of everything our modern-day pursuit of fair housing embodies.
FCC looking into how landlords are getting around predatory ISP laws
(NEWS) It became illegal in 2008 for landlords to restrict ISP access to their “partners,” but the FCC is looking into loopholes allowing the practice to persist.
The Federal Communications Commission (FCC) recently announced it is seeking comments on broadband access in multi-tenant buildings.
The FCC wants to gain a better understanding of consumer choice and pricing in apartment and office buildings. Even though most cities have multiple internet service providers (ISPs), renters are often stuck with only one option due to agreements between ISPs and landlords.
The Wireline Competition Bureau is seeking comments about:
- Revenue sharing agreements between landlords and ISPs, which incentivizes the landlord to steer tenants to a certain provider.
- Exclusive wiring agreements in which a landlord says only one ISP can provide service to the building.
- Exclusive marketing agreements in which only one ISP is allowed to market in the building.
In 2008, the FCC banned exclusive contracts for telecommunications services in apartment buildings.
Even so, ISPs and landlords have found ways to circumvent the rules, preventing tenants from having internet options. A landlord is prohibited from contracting with an ISP for sole service to a building.
One way to get around this rule is to deed ownership of the wiring to the landlord, allowing the landlord to decide which companies have access or not. The FCC rules do not apply, because the landlord owns the wiring.
ISPs can also enter into an agreement with landlords to prevent advertising in the building. The landlord can impose fees on companies that need access to install new wiring. All of these practices block competition for tenants, which drives up prices and limits options, and is the focus of the FCC’s push.
The FCC wants to hear from consumers who have dealt with broadband building restrictions. Tenants, landlords, real estate agents and even ISP owners can comment on the FCC proceedings for 30 days following the public notice.
If you’re a property owner, it’s time to review your agreements in this area to make sure you don’t end up in the FCC’s crosshairs now or in the future.
Housing supply crisis: NAR insists governments take ‘once-in-a-generation’ action
(POLITICS) After years of sounding the alarm bell regarding housing supply and demand imbalances, NAR is pushing local and federal governments to respond “immediately.”
The National Association of Realtors (NAR) has repeatedly beat the drum for over six years regarding housing supply, so much so that perhaps real estate practitioners have simply accepted it as the ongoing problem that it is. But in a new report by Rosen Consulting Group, released by NAR, housing supply is officially in crisis across all regions.
NAR Chief Economist, Dr. Lawrence Yun has reiterated in most reports for years that the only relief for increasingly tight inventory levels lies an increase in housing starts, placing industry hopes firmly in the hands of American homebuilders who are strapped with lending standards that shifted after the 2008 housing crash, now paired with labor shortages and astronomically skyrocketing pricing on materials.
NAR reports that after decades of under-building and under-investment, housing is now in more of a “dire” status than previously expected. The report, “Critical Infrastructure: Social and Economic Benefits of Building More Housing” asserts that local and federal policymakers must consider “once-in-a-generation” action and that “no matter the approach,” action must be “immediate.”
For an organization that typically employs very tempered wording, this aggressive language is alarming.
As bloggers scream “housing bubble” and analysts warn the script looks nothing like 2008, the timing of this report and the alarm bells being run by NAR are not to be ignored.
“The state of America’s housing stock… is dire, with a chronic shortage of affordable and available homes [needed to support] the nation’s population,” the report asserts. “A severe lack of new construction and prolonged underinvestment [have led] to an acute shortage of available housing… to the detriment of the health of the public and the economy. The scale of underbuilding and the existing demand-supply gap is enormous… and will require a major national commitment to build more housing of all types.”
Dr. Yun notes “It’s clear from the findings of this report and from the conditions we’ve observed in the market over the past few years that we’ll need to do something dramatic to close this gap” between hopeful homebuyers and tightened supply levels.
The report urges lawmakers to “expand access to resources, remove barriers to and incentivize new development, and make housing construction an integral part of a national infrastructure strategy.”
NAR President Charlie Oppler, says that adequate increases in housing construction this decade would add an estimated 2.8 million American jobs and $50 billion in new, nationwide tax revenue. “Additional public funding and policy incentives for construction will very clearly provide huge benefits to our nation’s economy, and our work to close this gap will be particularly impactful for lower-income households, households of color and millennials.”
Earlier this year, NAR encouraged policymakers to reform zoning and permitting policies, also recommending other policies to address national housing supply shortages.
At that time, it sounded like an urgent request. Today, we hear an alarm bell, a demand.
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