BEYOND THE NUMBERS
House and Senate Tax Plans Cut Affordable Housing, Set Stage for Deeper Cuts Later
The pending House and Senate tax bills threaten to deeply undermine programs that help low-income Americans keep a roof over their heads. Most importantly, both bills include large tax cuts, mainly for the wealthy and corporations, that would raise deficits by more than $1.4 trillion over ten years — which policymakers will likely use to justify large cuts to a wide variety of programs that would include federal housing assistance. Both bills also weaken tax subsidies for developing affordable housing (though the Senate bill retains one important subsidy that the House bill would eliminate). At a time when more resources are needed to help the neediest families afford housing, the tax bills move in the wrong direction.
In their budget plans, President Trump and congressional Republicans have made clear that they want to cut non-defense discretionary (NDD) funding, the budget category that includes most federal housing programs, and the proposed tax bills would make those cuts likelier. The 2018 congressional budget resolution would by 2027 reduce NDD funding to 18 percent below the 2017 inflation-adjusted level — to a level, as a share of the economy, not seen since President Hoover. The congressional budget doesn’t say which NDD programs policymakers should cut, but the 2018 Trump budget proposal does. That plan would defund Housing Choice Vouchers for 250,000 families, cut public housing funding by 29 percent, and eliminate the HOME and Community Development Block Grant programs, which in 2017 provide $4 billion in flexible funding to states and localities. Once the President and congressional leaders enact a tax bill, they will likely use the resulting deficits to justify program cuts like this, with the magnitude of the cuts growing over time.
The tax bills would also weaken needed, effective tax subsidies for affordable housing development. Both bills would reduce the number of affordable units developed through the Low-Income Housing Tax Credit (LIHTC), partly because their tax cuts would reduce LIHTC’s value to corporate investors, so each dollar of credit would generate less investment in affordable housing. The House bill would reduce affordable housing development even more by eliminating states’ authority to grant tax-exempt “private activity bonds” for affordable housing and other purposes (such as transportation, water and sewer infrastructure, and charter schools). Those bonds are particularly useful for developing affordable housing because projects that get the bonds and meet certain other criteria automatically qualify for LIHTC subsidies. The Senate bill, by contrast, retains tax-exempt private activity bonds, so it would mean a smaller — though still substantial — drop in the number of affordable units developed.
Neither bill provides new resources, such as a renters’ tax credit, to help the lowest-income families afford housing. The House bill trims the mortgage interest deduction, which disproportionately benefits higher-income homeowners — an approach we’ve suggested could help finance such a credit. But the bill uses the savings for tax cuts that largely benefit the wealthy and corporations, rather than housing assistance for needy families.
More than 11 million renter households pay over half their income for housing, forcing many to cut back on other basic needs and putting them at risk of eviction and homelessness. Policymakers should strengthen assistance for these families, especially those with the lowest incomes, such as low-wage workers and poor seniors and people with disabilities. The House and Senate bills do the opposite, weakening important tax subsidies and laying the groundwork for harsh cuts to vital housing assistance programs.
- El crédito tributario por hijos
- Federal Payroll Taxes
- Federal Tax Expenditures
- Fiscal Stimulus
- Marginal and Average Tax Rates
- Tax Exemptions, Deductions, and Credits
- The Child Tax Credit
- The Earned Income Tax Credit
- The Federal Estate Tax
- Where Do Federal Tax Revenues Come From?
- Where Do Our Federal Tax Dollars Go?