The Republican proposal to overhaul the tax code gained a powerful enemy over the weekend when the National Association of Home Builders, a trade group that been supportive until now, launched a drive to defeat it.
The decision came despite an announcement by a key House Republican, Ways and Means Chairman Kevin Brady of Texas, that a deduction for property taxes would be maintained in tax legislation that is to be unveiled Wednesday.
Lawmakers from high-tax states, including California, Illinois, New Jersey and New York, had been pressing House leaders to continue to allow taxpayers who itemize to deduct state and local taxes.
A tax framework unveiled in September by President Trump and Republican House and Senate leaders called for maintaining the deductions for mortgage interest and charitable contributions while eliminating other write-offs.
Staff from the home builders association had been meeting with Brady’s staff because of concerns that eliminating the property tax deduction, combined with a proposal to double the standard deduction, would reduce the tax benefits of home ownership.
A study commissioned by the National Association of Realtors had found that the combination would lower the value of the average home by 10%.
“Even though they’re technically not touching the home mortgage interest deduction, the reality is they’re going to gut the mortgage interest deduction,” said Gerald H. Howard, CEO of the home builders group. “Doubling the standard deduction would mean only the wealthiest homeowners would be able to take the mortgage interest deduction.”
Howard said his group was pitching a tax credit that would let middle-class homeowners reduce taxable income by 12% of what they paid in mortgage interest and property taxes. The benefit would have been capped at mortgages of $500,000 and property taxes of $5,500, and there would have been a phase-out for high-income taxpayers.
Heritage Action for America, an advocacy group working to build support for the tax plan, released a letter Monday designed to blunt the builders’ effort. Signed by 146 real estate professionals, it argued that 70 percent of taxpayers do not itemize, and they would benefit from the cut in tax rates that would come from eliminating deductions, especially the break for state and local taxes, known as SALT.
“Repealing the SALT deduction would finally put pressure on fiscally irresponsible state and local politicians, especially in California, New York and New Jersey, to lower their income and property taxes,” the letter said.
Michael Needham, chief executive officer of Heritage Action, said on Fox News Sunday that “every single corrupt force of the status quo in Washington” would be coming out to “protect their little carve out” in the tax code.