Vogel: Tax Reform And Housing
Discussions about the proposed Federal tax bill have focused almost exclusively on political winners and losers. But I think we should be debating larger questions like whether we should add $150 billion to the deficit each year, especially given the low unemployment rate. And the proposed tax bill’s impact on social programs is another topic that’s not getting enough coverage. Most social programs depend on Federal government support, and it’s naïve and dangerous to think that increased philanthropy can make up for cuts at the Federal level.
Worse still, the proposed tax bill actually undermines some key incentives for charitable giving. By eliminating the estate tax, wealthy families would lose a compelling reason to make donations to nonprofit organizations. And if we double the standard deduction, experts predict that 95 percent of taxpayers would no longer itemize their deductions and therefore receive no tax benefits for donating to charitable organizations.
That’s a double hit to philanthropy at the very time the bill assumes it will do more.
In the case of housing, the drop in the corporate tax rate from 35% to 20% greatly reduces the value of the low income housing tax credit, the key program involved in financing 90% of new, affordable housing in the United States. Housing experts estimate that in Vermont this one change in the tax bill will translate into $4.5 million less money each year for building affordable housing.
In drafting the last major tax reform bill, President Reagan and Congress recognized that changing the rules would damage some social programs like housing. So as part of the 1987 legislation, Congress created the low income housing tax credit as a way to counteract this collateral damage – which seems like a more reasonable and humane approach than envisioned in the current tax bill.
And unfortunately the need for affordable housing keeps growing. Across the country, eleven million families now pay more than 50% of their gross income in rent - a huge increase since 2001. And in Vermont, the number of homeless people increased last year to 1,225.
There may be reasons to reform the tax code and there may even be justification for allowing the deficit to increase. But in formulating the proposed tax bill there was little public debate about these bigger issues – or a meaningful attempt to mitigate the impact on our most vulnerable citizens.