Home Builders Will Oppose Republican Tax Bill -- Update

By Richard Rubin Features Dow Jones Newswires

An influential home builders group will oppose the House Republicans' forthcoming tax bill, in a blow to the party's attempt to forge unity among business sectors.

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The National Association of Home Builders, which had expressed openness to changes in the mortgage-interest deduction, decided it couldn't back the GOP bill. The association's leaders made the decision after top Republicans told them this weekend that they wouldn't replace deductions for mortgage interest and property taxes with a new tax credit.

"It's a bad bill for the housing sector," Jerry Howard, CEO of the builders group, said in an interview on Saturday. "We will not be for it."

House Republicans plan to release their tax bill on Wednesday. The tax legislation is the centerpiece of the GOP's economic and political agenda, and many details have been closely guarded as lawmakers try to build a coalition to push it through the House before Thanksgiving.

The plan nearly doubles the standard deduction, ends personal exemptions and may repeal the deductions for state and local taxes. The combination would remove much of the incentive for the mortgage-interest deduction outside the highest-cost areas and could potentially hurt home prices.

Republicans had been talking about replacing those breaks with a tax credit for all but the highest-income households. Such a credit might include property taxes and interest and replace the remnants of the mortgage-interest deduction.

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According to estimates from the Tax Policy Center -- which includes assumptions about blanks left in the House GOP plan -- the current Republican framework would leave 4% of taxpayers claiming the mortgage-interest deduction, down from 21% today.

It isn't yet clear what would be in the House plan or a subsequent Senate bill. House leaders are still looking for some provision to accommodate Republicans from New York and New Jersey who oppose the repeal of the state and local tax deductions.

Republicans had long said that they wanted to keep the mortgage-interest deduction. The break is popular with voters, despite research showing little affect on homeownership rates and a disproportionate benefit for high-income households.

Mr. Howard said Saturday he had been working with House Ways and Means Committee staff on a credit to replace the mortgage-interest and property-tax deductions, and he said he had been optimistic throughout the week. A credit could have directed the tax code's subsidy for homeowners more broadly across income groups, but it would have been more disruptive politically than leaving the mortgage-interest deduction alone.

According to the home builders, negotiations were ongoing with one version of the credit worth 12% of property taxes and mortgage interest.

Eligible taxes would have been capped at $5,500, indexed for inflation. Eligible mortgage debt would have been capped at $500,000, also indexed for inflation. There would have been a phaseout for higher-income taxpayers.

But Mr. Howard got a call from Ways and Means Chairman Kevin Brady (R., Texas) on Friday night and from House Speaker Paul Ryan (R., Wis.) on Saturday.

According to Mr. Howard, Mr. Ryan said the idea hadn't gotten enough discussion among rank-and-file lawmakers.

A spokeswoman for Mr. Ryan declined to comment Saturday.

Mr. Brady, in a statement, said the issue would remain under discussion.

"The home builders have been great partners in developing a new home credit that helps more Americans with both their mortgage and property taxes, by expanding this tax relief to homeowners who don't itemize," Mr. Brady said. "I hope members of Congress will examine it closely to determine if they want it included before tax reform heads to the president's desk."

Many business groups are backing the Republican tax framework on the promise of lower tax rates for corporations and other businesses, but that could change as the details are unveiled. The home builders, along with the National Association of Realtors, are a powerful lobbying force, with members spread throughout the country and a significant stake in changes to homeownership incentives currently in the tax code.

Mr. Howard said his group's members urged him to fight the bill even more aggressively than he had been prepared to support it.

Write to Richard Rubin at richard.rubin@wsj.com

(END) Dow Jones Newswires

October 28, 2017 18:56 ET (22:56 GMT)