Don’t Get Caught Flat-Footed on MID, REALTORS® Warned
Though partisanship in Washington, D.C., is at a historic high, that doesn’t mean lawmakers won’t take on tax reform later this year, possibly putting the mortgage interest deduction and other tax incentives important to real estate into play, said Jeffrey Birnbaum, a long-time Washington journalist who captured the 1986 tax reform battle in an award-winning book, Showdown at Gucci Gulch.
“Don’t count out the chances of tax reform,” Birnbaum told hundreds of REALTORS® in Washington this week for the 2013 Midyear Legislative Meetings & Trade Expo. “It could start out slow and could gain momentum,” which is how the massive 1986 reforms unfolded.
Birnbaum noted that both Democrats — including President Obama — and Republicans have said they would like to overhaul the tax code, and although partisan differences have become a stumbling block to members’ ability to reach consensus on many issues, there’s an unusual dynamic at work in the two tax-writing committees that could end up being a game-changer. That dynamic is the retirements of Rep. Dave Camp (R-Mich.), chair of the House Ways and Means Committee, and Sen. Max Baucus (D-Mont.), his counterpart on the Senate Finance Committee.
Both have said they want to move forward with tax reform before they go, and the fight over raising the federal debt ceiling, which is expected to be reached this fall, provides a possible trigger event for them and other lawmakers to come to agreement on big tax changes, said Birnbaum.
What’s more, the federal budget deficit is coming down more quickly than lawmakers expected, thanks to the improving economy and the across-the-board spending cuts under the “sequester” that took effect at the beginning of this year. It’s possible the government could go from a $1.1 trillion deficit this fiscal year to a surplus by fiscal year 2015, which would ease the give-and-take on tax and other issues as lawmakers come to agreement on reform.
Birnbaum said the the risk to real estate is that lawmakers will be looking to the MID as one of the biggest places to find money to offset any tax cuts they agree to. That puts at particular risk the amount of MID benefit available to higher-income households and those with second homes. “No one should take [the] MID for granted,” he said.
The capital gains tax rate applied to the carried interest of general partners in investment partnerships will also be on the table, as will deductions for charitable contributions and employer-sponsored health plans.
Birnbaum said it’s important for REALTORS® to stay engaged, because “you don’t want to be caught flat-footed if Congress overreacts,” which it often does when it legislates, Birnbaum said. He added that the visits that real estate professionals are making to Capitol Hill this week are just the kind of engagement that’s needed now. “Lawmakers will be able to hear from you directly,” he said.
Rep. Randy Nuegebauer (R-Texas), chair of the House Financial Services Committee’s Subcommittee on Housing and Insurance, who followed Birnbaum on the speaker’s podium, complimented REALTORS® for their strong presence on Capitol Hill. “You’re well represented here,” he said. “You’re at the table with us, and we’re delighted to work with you. We want to make sure these fixes we want to do are right.”
Source: Robert Freedman, REALTOR® Magazine