The House of Representatives passed a seriously flawed tax reform bill by a vote of 227-205 on November 16. The legislation is estimated to increase the national debt by $1.5 trillion over a decade. Dramatically increasing the debt in this way will likely lead to deep spending cuts in the future to important domestic programs, including affordable housing and community development programs, as well as to entitlement programs like Medicare, Medicaid, and Social Security. In the Senate, the Committee on Finance passed its tax reform bill, which would likewise add $1.5 trillion to the debt, after four days of debate. The Senate is expected to vote on their bill following the Thanksgiving break. Both bills would provide massive tax cuts to millionaires, billionaires, and corporations.
The House bill takes a historic step in directly reforming the mortgage interest deduction (MID), a $70 billion annual tax expenditure that primarily benefits higher income households. The bill would lower the amount of mortgage against which the MID could be claimed from $1 million to $500,000, impacting fewer than 6% of mortgages nationwide and saving an estimated $95.5 billion over the first decade. The legislation does not, however, reinvest the savings from MID reform into affordable housing solutions for those most in need. The bill also eliminates the New Markets Tax Credit program and the tax exemption for private activity bonds, which are critical to the production and preservation of affordable housing through the 4% Low Income Housing Tax Credit. The 4% credit contributes to upwards of 60% of the affordable homes built or preserved in America each year.
The Senate bill fails to reform the MID but does protect the tax exemption for private activity bonds and the New Markets Tax Credit program. Republican senators also included a provision in their bill to repeal the Affordable Care Act’s individual mandate, which requires individuals to pay a fine if they are not insured and helps guarantee coverage for pre-existing conditions. Repeal of the mandate is projected to result in 13 million fewer people receiving health insurance and an additional 10% increase in health care premiums. Both the Senate and House plans fail to expand the Housing Credit or include much-needed improvements to the program to incentivize developing rental homes affordable to the lowest income families, as proposed by Senators Maria Cantwell (D-WA) and Orin Hatch (R-UT) (expansion and improvements) and Representatives Pat Tiberi (R-OH) and Richard Neal (D-MA) (improvements).
NLIHC opposes both tax reform bills.