The California Association of REALTORS® (C.A.R.), one of the largest real estate trade organizations in the U.S. with more than 190,000 members, recently undertook a high-visibility campaign against proposed tax reform under consideration by members of Congress.
All Association members are encouraged to participate in C.A.R.’s Call to Action. For information, visit www.car.org.
C.A.R.’s anti-tax reform campaign gained traction this past week with the purchase of full-page newspaper ads in several of California’s major daily newspapers and national publications, including the San Diego Union-Tribune, Orange County Register, Los Angeles Times, Bakersfield Californian, Sacramento Bee, Modest Bee and Fresno Bee, as well as The Wall Street Journal’s D.C. edition and Politico’s print edition. The newspaper ads, dated Nov. 14, were formatted as an open letter to President Trump and California’s Congressional Delegation and signed by C.A.R. President Steve White.
The full-page newspaper ad stated: “Congress is considering legislation that would punish homeowners, eliminate the financial benefits for homebuyers and leave hundreds of thousands of people across California much worse off than they are today. If the goal of tax reform is to help middle-class Americans keep more of their hard-earned money, this proposal fails miserably. Tax reform shouldn’t hurt Californians, but the House of Representatives proposal does, in a big way. It eliminates important incentives that help first-time homebuyers by capping the Mortgage Interest Deduction, limiting property tax deductibility and changing capital gains exemptions. From theOregon border south to San Diego, working Californians take a beating.”
The ad featured a question followed by a response: “How could any member of the California Delegation think this plan is good for the Golden State? The average California house costs two-and-a-half times the national average and housing supply projections show the state will be nearly 3 million houses short by 2020. Only 32 percent of California families are able to purchase a median-priced home. With homeownership already a stretch, or out of reach altogether for so many Californians, now is NOT the time to make owning a home more difficult.”
The ad can be viewed by clicking this link, http://www.car.org/aboutus/mediacenter/newsreleases/2017releases/taxreformopenletterad.
The ad did not include details from a C.A.R. press release about provisions in the House bill, such as: lowering the mortgage interest deduction cap from $1 million to $500,000; eliminating the mortgage interest deduction on second homes; eliminating moving expenses; eliminating state and local income tax deductions; capping property tax deductions at $10,000; and, extending the capital gains exclusion qualification period from two years to five years.
Other features of the House bill included doubling of the standard deduction for couples from $12,700 to $24,000 per family, increasing the child tax credit from $1,000 to $1,600 per child and lowing inheritance taxes on large estates. Popular 401(k) retirement savings plans used by many Americans would be unchanged. .
According a C.A.R. press release, the Senate bill retains the $1 million mortgage interest deduction but completely eliminates the ability to deduct state and local income taxes, including eliminating property tax deductions. It also contains many of the real estate provisions in the House bill.
Also this past week, C.A.R. was joined by members of California’s homebuilding and housing community, including the California Building Industry Association and the California Housing Consortium, in calling attention to the proposed tax reform’s numerous disincentives to homeownership.
In a related development, the Orange County Register newspaper this past week published an opinion column by Diane Harkey, chair of the California State Board of Equalization and California’s highest ranking Republican. Harkey wrote in her op/ed: “Unfortunately, the Republican plan in D.C. is mimicking the California model by penalizing professionals, businesses and home ownership for those of us in states with an already high cost of living. It encourages retooling of industries and skewing tax refunds toward less-populated, smaller states with a lower cost of living. The plan reduces tax rates by eliminating worthy incentives to home ownership, which is for most Americans their largest investment and pathway to financial security.
“Reductions in corporate tax rates and repatriation of offshore dollars are worthy goals that will stimulate job growth, but our politicians in D.C. seem to be getting lost in ideological warfare to prove that they are not robbing the poor. Transferring benefits to beleaguered states attempting to rekindle manufacturing jobs and allowing ‘refunds’ for taxes that many did not pay is not tax reform.
“Elimination of the State and Local Tax deduction will harm the people of California who have worked hard to save and build equity in their homes and communities. Estimates are that property values will drop precipitously, affecting all as the market readjusts. While our state income tax is the highest in the nation, we do thanks to Proposition 13 have the benefit of relatively low property taxes. If property values and assessments drop, communities will be impacted, prodding our legislature to fill the gap by demanding higher property taxes, or local debt to fill the voids. I can envision a spiral effect and blame that will be laid on the doorstep of Republicans in D.C. and those who support them.”
Here is a link to Harkey’s op/ed: http://www.ocregister.com/2017/11/14/california-republicans-in-congress-should-remember-the-no-new-tax-pledge/
On Thursday, Nov. 16, the House of Representatives passed its version of the tax reform bill. The bill, called the Tax Cuts and Job Act, passed 227-205, with every Democrat and 13 Republican members voting no. The House version would reduce the corporate tax rate from 35 percent to 20 percent and reduce the number of tax brackets from even to four. It would also recalibrate the tax code to work in similar ways as an international system already used by foreign nations across the globe.
House passage is just one step, however. The Senate Finance Committee is working on a separate measure that could be brought to a vote within two weeks.
Here is C.A.R.’s statement in response to the House tax bill that passed: “We are disappointed with today’s passage of H.R. 1, the so-called Tax Cut and Jobs Act,” said C.A.R. President Steve White. “This bill is simply a direct attack on California housing and homeownership. Eliminating the incentive for people to buy homes and raising taxes on hundreds of thousands of California homeowners only puts the American dream further out of reach. We support fiscally responsible tax reform but lowering corporate taxes on the backs of middle-class families would be catastrophic. C.A.R. thanks the many courageous California Congressional members who believed their constituents deserved better and voted to do the right thing by opposing the bill.”