President Trump promised that an overhaul of the tax code would make it simpler for everyone to file their taxes and that it would mostly benefit the middle class.
But critics say the Republican tax plan that’s moved through the House and seems poised to pass the Senate is far from friendly to working and middle class Americans. And that’s especially true when it comes to housing and homeownership in high-end real estate markets like New York City.
Properties in some of the Rochester region’s suburbs and in the Finger Lakes could also be adversely impacted by the Republican tax plan, says James Yockel, CEO of the Greater Rochester Association of Realtors.
“It’s a little narrow-minded to say that what happens in New York City won’t affect us,” says Yockel. “We’re generally in favor of tax reform, but if you lose some of the incentives, it will make it harder for many people to get into a home of their own.”
A study by PricewaterhouseCoopers paints a much grimmer picture. The study warns that if the Republican tax plan passes in its current form housing prices would fall about 10 percent nationwide.
The GOP plan targets the deduction for interest on mortgage debt, which is a huge benefit when it comes to buying a home. Right now, a home buyer can deduct the interest payments on mortgages up to $1 million, but Republicans propose dropping that ceiling to $500,000.
This may seem like it’s of little consequence to most Americans, since the median price of a home in the US is hovering at about $250,000. It’s even lower in the Rochester region: approximately $83,000. But the figure isn’t a thorough gauge of housing prices or affordability, particularly in the major metros. For instance, it would be a challenge to find a starter home for $250,000 in areas like New York City, Boston, or almost anywhere in California.
While critics’ claims that the Republican tax plan would turn the US into a nation of renters may be exaggerated, many economists warn that the plan poses other problems for the middle class. They note that the country is still recovering from one of the worst recessions in US history, for instance. And when the housing market slumps, sales of nearly every product and service homeowners need from carpeting to washers and dryers slump with it.
And many middle class Americans had to delay retirement because they lost the equity in their homes. A proposed change to the capital gains provision could worsen the problem for some retirees. The government allows homeowners to exclude up to $250,000 from their taxable income ($500,000 for married taxpayers) from a sale of their primary residence, according to a recent Forbes article. Currently, home owners need to live in the home for two of the last five years, but the Republican plan pushes it to five out of the last eight years.
This article appears in Nov 29 – Dec 5, 2017.
Gee, liberals like Tim used to be all for eliminating deductions for housing interest and property and income taxes since most of the benefits went to the upper income groups. But not any more. Since it was the Republicans that proposed limiting or doing away with these deductions, they have become very, very concerned with protecting higher income taxpayers.
Let’s review a few facts. Only about 30% of taxpayers itemize today. Do you think that is evenly distributed across income levels? Not at all. As the link below shows, only 10-15% of the bottom half itemize, but 75-95% of the top quarter (income over $100k) do. So they are the ones getting the itemization benefit. And the benefit is increased since they are in higher tax brackets. A $1000 deduction might save them $400 in taxes, versus $150 for the same deduction for someone in the 15% bracket. Is that fair Tim?
I think the Republican tax cuts provide too much benefit to the very rich, but eliminating/restricting tax subsidies such as housing is not one of the problems.mwith the doubling of the standard deduction (unfortunately partially offsetting it by eliminating the personal exemption) and limiting itemized deductions, it is estimated that the number itemizing could drop to as low as 10%.
Housing today is subsidized like no other investment. Renters do not get to deduct a portion of their rent for interest or property taxes. And what other investment can be sold with the first $500k of profit free from taxes?
https://taxfoundation.org/who-itemizes-ded…
@ Luxembourg
I agree renters don’t get the deduction, and also unlikely to receive any trickle down benefit from these deductions currently. However they are sure to see rent go up as a result.
Equal or more venom should be aimed at the plan to tax student loan interest, state income taxes, student tuition waivers etc etc, while, among other things lowering the taxes on pass-through income (how does one defend this?!!).
This tax “overhaul” is in-your-face class warfare. No need or reason to pretend otherwise anymore or to avoid calling it like it is. The Dems are on-board with the bulk of it anyway even as a clear majority of Americans are not, and why should they be. To bad they have no political influence in this republic, since they cannot offer contributions now, or jobs when the political creatures who supposedly represent them “retire”.
This so called reform will add to the debt and deficit when it is already an unpayable 20 trillion and defense spending is off the charts. At a time when our military cannot do the two things it is expressly created to do – protect the border and defend the constitution. They’re too busy protecting the interests of the financial elite overseas. Back home real unemployment is over 20%, debt service is over 400 billion/year, almost the same amount as the deficit. Interest rates are near zero and corporations are clocking record amounts of capital. This country’s economy is deliberately sinking into third-world status and this legislation will only tie a rock to it, as intended.
“The study warns that if the Republican tax plan passes in its current form housing prices would fall about 10 percent nationwide. “
This sounds like it’d be a WIN for the “we need affordable housing” crowd?!?
Also, the SALT is limited to $10,000, so all the “rich” will be loosing a huge deduction on their property taxes and paying more