Our top story the home mortgage tax deduction has been one of the standard selling points in the real estate industry for decades. Any change is bound to provoke a strong reaction. The new Republican tax proposal would limit those deductions to loans up to $500,000. It has provoked a strong negative reaction from realtors in the building industry. Not everyone sees this as a cataclysmic change. Joining me is Bob Kevane, board president, San Diego Association of Realtors . Welcome to the program.Thank you.The national Association of realtors president said that eliminating or nullifying the tax incentives for homeownership puts home values and middle-class homeowners at risk. You are at a national realtors conference right now. Is that pretty much everyone's reaction?I would say the people here that is probably the majority of the reaction. Some don't have it -- as much concern. Overall, I would say it's been negative especially from people in the higher cost states.What is your opinion?It keeps changing as I get more into it and thinking about it. I think the problem that we have in San Diego is we have two family workers generally and they been able to afford a house and most almost seems impossible to sell a house less than $500,000. The new were ones are $700,000 and up.Do you think this will have a major impact on homebuying?I don't know if it will have a major impact because half of the houses in San Diego are under $500,000. It will have an effect on the availability of the population as it increases because if they don't build houses there is fewer and fewer places to live, which means it will move from the for sale to the rental housing business because that's what they can produce.On the positive side I hear that you compare this being a CPA as well to win a removed the car loan interest deduction from American taxes. Do you see it comparison?I do because it is confusing and most people don't understand how the tax law works. They eliminated the interest deduction on new car loans. That stop the sales of cars. It was a very small amounts. That amount was seven or $800. At that point I said to my clients the price is going down five or $6000. It was a great time to buy a car and I will tell you they said if I can't write off my car interest, I'm not going to buy a car. That very well could have been with respect to housing.The building industry is out about the proposed limit. The chief executive of cornerstone communities is quoted in the New York Times is saying there's going to be less incentive to build and less incentive to buy. Do you agree?I do agree with that when you're talking about homebuilders. Because in San Diego over the last 20 or 30 years we put so many fees on the cost of building a house plus regulation that in some of the areas like Carlsbad, it's close to $200,000 in fees and takes years to get projects developed. That is why they can't build houses to sell for less. If we don't build the house -- the housing were not gonna build up the market. We've been locked in for a long time. People will not sell their houses because of the low property taxes. Now it's going to give him another reason and word down to building lesson 5000 housing -- houses.It has a lot of hurdles to clearing Congress and because of the outcry against the change, do you think it will be part of the final tax proposal?I think they will probably change that somewhat. The problem they have is they had to design a bill that didn't come up with more than $1.5 trillion in costs over the next 10 years. So when you make a change in one area you have to make a change in another. So I don't know where else that would move. At this particular point in time, it looks to me like it's probably up or down. If they push it through rapidly, I think it would pass. There's a lot of very good provisions of the law. These ones seem like all of the rules and the laws everywhere are designed to hurt middle income people. People at the bottom have many forms of subsidized housing. People at the top have plenty of money and they can live wherever they want. It's another one of those squeezes on the middle income people. I think they will be surprised at the outcry.I've been speaking with Bob Kevane, board president, San Diego Association of Realtors . Thank you very much.Thank you, Maureen.
Updated at 2:24 p.m. ET
House Republicans unveiled a draft tax bill on Thursday, calling for deep cuts in both individual and corporate tax rates.
"With this bill, we will grow our economy by delivering more jobs, fairer taxes, and bigger paychecks to Americans of all walks of life," said Rep. Kevin Brady, R-Texas, chairman of the House Ways and Means Committee.
The rollout, originally scheduled for Wednesday, was postponed to give bill drafters more time. They're still struggling to find sufficient revenue to avoid a budget-busting score. As a result, some of the tax changes have been made temporary or phased in over time.
Here are some of the highlights of the bill (you can read the full text here):
- Four individual tax brackets would be introduced at 12 percent, 25 percent, 35 percent, with the top rate of 39.6 percent remaining in place for the very wealthy.
- Corporate taxes would drop from 35 percent to 20 percent permanently.
- Standard deduction increases from $6,350 to $12,000 for individuals and $12,700 to $24,000 for married couples.
- Child tax credit would expand from $1,000 to $1,600.
- Federal deductions for state and local income and sales taxes to be eliminated, but local property taxes can be deducted up to $10,000.
- No changes to limits on 401(k) pre-tax contributions.
- Alternative Minimum Tax to be repealed.
- Estate tax would kick in at $11.2 million, up from $5.49 million, but it would be fully repealed as of 2024.
- Corporate profits from overseas would no longer be taxed, but there would be a minimum 10 percent tax on foreign subsidiaries.
The plan leaves intact a top individual tax rate of 39.6 percent to address charges that the cuts are unduly favorable to the rich. The bill would raise the income threshold at which the top tax rate would apply to $500,000 or a million dollars for couples. In a boost for the wealthy, the plan also eliminates the alternative minimum tax and phases out the estate tax over a period of six years.
Broadly speaking, the GOP bill would sharply reduce taxes on both individuals and corporations, potentially draining trillions of dollars from federal coffers over the next decade. The Republican budget, however, makes room for only $1.5 trillion in revenue reduction over that period. And fast-track Senate rules, designed to avoid a Democratic filibuster, say the bill can't add to the deficit beyond 10 years.
Republicans hope to offset some of the lost revenue from lower tax rates by eliminating tax breaks elsewhere in the code.
"With this plan, we are getting rid of loopholes for special interests and we are leveling the playing field," said House Speaker Paul Ryan, R-Wisc.
But that's politically challenging. Two of the costliest tax breaks — for mortgage interest and gifts to charity — were declared off-limits at the outset, although the draft plan limits the mortgage deduction on future home purchases to loans of $500,000, down from the current $1 million. Efforts to curtail other popular breaks — for retirement savings and state and local taxes — have faced pushback from the White House and Republicans in high-tax states.
The draft bill released by the House Ways and Means Committee would reduce the number of individual tax rates from seven to four: 12 percent, 25 percent, 35 percent and 39.6 percent. The bill nearly doubles the standard deduction, which will make tax-filing easier for some people. However, it eliminates personal exemptions, which could adversely affect larger families.
As expected, the corporate tax rate would drop from 35 percent to 20 percent. And the bill would establish a lower tax rate of 25 percent for so-called "pass through" businesses such as partnerships that currently pay taxes at their owners' individual rate.
The bill aims to encourage business investment by allowing companies to deduct those costs immediately, rather than spreading the deduction over a period of years. However, this provision is scheduled to sunset after five years.
Multinational corporations would no longer be taxed on profits earned overseas, although the plan would establish a minimum tax rate of 10 percent on foreign subsidiaries.
Although House lawmakers floated the idea of limiting tax breaks for retirement savings, the draft bill unveiled today would preserve the deduction for 401(k) style savings.
The bill would eliminate the deduction for state and local income taxes, a move that's particularly costly in high-tax states such as New York, New Jersey, and California. In an effort to mollify House Republicans from those states, drafters included a provision to allow taxpayers to deduct up to $10,000 in local property taxes.
The lower limit on mortgage interest that's tax deductible is sure to invite opposition from the housing industry, a powerful player in Washington.
"Eliminating or nullifying the tax incentives for homeownership puts home values and middle class homeowners at risk," said William E. Brown, president of the National Association of Realtors.
The Ways and Means Committee plans to take up the draft tax bill next week, with an eye towards a House vote before Thanksgiving. President Trump is eager to sign a tax overhaul by December.
"We're working to give the American people a giant tax cut for Christmas," Trump said. "It will also be tax reform and it will create jobs."
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