Senate Blank Slate Approach To Tax Reform Could Significantly Impact Homeowners & Mom And Pop Investors
The US Tax Code has not been comprehensively revised for almost 30 years, but over 15,000 changes have made it incredibly complicated. When it comes time for big change, normally the Senate and House committees drafts Bills for circulation. But this time, any solutions are bound to be unpopular. When it comes to tax benefits verses tax rates, every $2 trillion benefits adds 1 to 2% to tax rates so one way or another someone is not happy. So the Senate Finance Committee came up with the “Blank Slate” approach. Every single tax credit, exemption and exclusion is considered out – hence the phrase blank slate – unless it is added to a “Pardon List” due by July 26. Getting on the list requires that the provision help grow the economy, make the code fairer and promote an important policy position.
With almost 80 million homeowners, real estate is most widely held asset and the mainstay of personal wealth for America’s families. Millions benefit from the mortgage interest deduction, and credits, exemptions and deductions for real estate taxes, capital gains and other expenses. When folks have confidence in their home investment, consumer confidence and spending rises along with jobs and the rest of the economy, helping us all.
Investors are leading the way to a full housing recovery. Especially now, local mom and pop investors are turning foreclosures back into livable homes. The more homes they’re willing to buy and the more they’re willing to pay for them, the better is it for all of our home values. They count on tax benefits like lower capital gains rates and 1031 exchange rules in return for the risks they tax.
These benefits most certainly pass the three prong approach to saving particular tax benefits. To survive a provision must grow the economy, make the code fairer and promote and important policy objective. We’ve all seen firsthand how important real estate is to jobs and growing the economy, not to mention our own wallets. These provisions benefit real life people, not Wall Street or corporate America. Homeownership is among the most fundamental important policy objectives – it’s a fundamental of the American Dream itself and for good reason: home equity is historically 2/3 of middle class wealth, essentially a forced savings and a financial safety net-nest egg for average Americans.
We will not see full real estate recovery and our home values where they once were until 2017 or longer. Now’s not the time to mess with real estate and America’s home values. With 20% with a mortgage still underwater, and estimated 4 million still in foreclosure and 6 million in default, we’re not out of the woods quite yet.