Republican Leaders Release Tax Reform Framework

Republican leaders released a tax reform framework on September 27. According to Republican leadership, the framework aims to simplify the tax code, bring businesses and investments back to the U.S., encourage economic growth, and broaden the tax base. Congressional tax committees will use the framework as a starting point to draft and attempt to pass a tax reform bill before the end of the year. The framework would provide deep tax cuts weighted toward those in higher income brackets and businesses but makes no mention of how the cuts would be paid for. Massive tax cuts not offset by other revenues could mean future cuts to important social programs like affordable housing.

The Republican tax reform proposal fails to address one key way to spur economic growth and help people in America who are struggling to afford their homes: reprioritizing and rebalancing federal housing policy by reforming the mortgage interest deduction (MID) – a $70 billion tax write-off that primarily benefits higher income households – and reinvesting the savings in affordable housing for those with the lowest incomes.

While the Republican framework would raise the standard tax deduction, which could provide a greater tax break to middle income families, it would also make the MID even more regressive, benefitting only the very highest-income households with the largest mortgages. Any legislation that dramatically increases the standard deduction must lower the cap on the amount of a mortgage on which interest can be deducted.

Experts across the political spectrum agree that the MID is a wasteful use of resources that does not incentivize homeownership and instead encourages higher levels of debt, increases costs for everyone, and mostly benefits those with high incomes who do not need federal assistance to live in a stable home. If Congress is serious about jumpstarting our economy and helping families thrive, they should directly reform the MID and reinvest the savings into providing decent, accessible, and affordable housing for those who need it most. Lowering tax rates for millionaires and corporations without addressing the affordable housing crisis in America should be a non-starter.

The NLIHC-led United for Homes (UFH) campaign calls on the president and Congress to embrace smart reforms to the MID: reducing the amount of a mortgage eligible for a tax break from $1 million to $500,000—impacting fewer than 6% of mortgage holders nationally—and converting the deduction into a credit. These changes would provide additional tax relief for 25 million lower income homeowners and would result in $241 billion in savings over 10 years to be reinvested into critical rental housing solutions for families with the greatest needs.

Congress will now work to turn this tax reform framework into legislation, which opens the door to direct changes to the MID. NLIHC calls on leaders in the House and Senate to seize this once-in-a-generation opportunity to address one of the biggest barriers to economic success for families struggling to get by: the lack of decent, accessible and affordable homes for the lowest income people.

Read the Republican tax reform framework at: