Several organizations came together on tax day to call on the House of Representatives to pass legislation dealing with the housing crisis -- and to criticize the Senate for passing a bill that mainly gives tax breaks to businesses. (Click here to view coverage by Lou Dobbs). At the press event organized by the Laborers' International Union of North America (LiUNA), the union's president Terence O'Sullivan and others blasted the Senate bill, which CTJ criticized earlier this month. "To call it pigs at the trough would give a bad name to pigs," O'Sullivan said. Representatives from the Economic Policy Institute, the Center for American Progress, ACORN, the Service Employees International Union (SEIU), as well as a woman facing foreclosure on her home all called for action by Congress, and several noted that most of the action needed would be outside the tax code. CTJ director Robert McIntyre said, "If we gave this issue to the agriculture committees, they'd probably give us farm subsidies, so if we give this problem to the tax-writing committees they give us tax breaks because that's what they do. I'm pretty sure we have committees in Congress to deal with housing."
In the House, that committee is the Financial Services Committee chaired by Barney Frank, who wants to allow the Federal Housing Administration to guarantee refinanced home mortgages. Another provision that many advocates want would allow a judge in some situations to rewrite the terms of a home mortgage, but Democratic leaders in the House have cast doubt about whether this can be passed.
The Ways and Means Committee (the tax-writing committee in the House) approved a package of tax provisions that was an improvement over those passed by the Senate and which may be attached to a broader bill. The Ways and Means bill does not include the very worst provision in the Senate bill, the "net operating loss carryback" provision (or NOL carryback). This provision would allow companies taking losses this year and next year to deduct them against taxes they paid in the previous four years (instead of the previous two years, as currently allowed) even though it is highly unlikely that this will prevent layoffs of employees or do anything for home builders other than encourage them to dump their inventory.
Unlike the Senate legislation, the Ways and Means Committee bill includes revenue-raising provisions to offset the costs of the tax breaks. One would require that brokers of publicly traded securities report the basis of a given security in a transaction to ensure that capital gains taxes are paid properly. Another offset would delay and limit an unnecessary tax break for corporations, "worldwide interest allocation," which hasn't even gone into effect yet. (For more on these offsets, see last week's article on the House legislation.)
Both bills include a deduction for state and local property taxes available to people who don't itemize deductions (currently this is only allowed for itemizers). At Tuesday's event McIntyre pointed out that most people with mortgages are itemizers, so the people most likely to benefit from this are homeowners without mortgages, making it difficult to see how the provision has anything to do with a mortgage foreclosure crisis. Both bills also include a credit for buying a home, but in neither case would the credit be available for a down payment. It would not be received until after after a homebuyer files taxes after the home is purchased.
In the House version, this is a refundable credit of $7,500 of first-time home-buyers, but it must be paid back over 15 years. In the Senate version, it's a non-refundable $7,000 credit for the purchase of foreclosed homes, which actually might encourage foreclosure. The credit in the Senate bill is disallowed to taxpayers in jurisdictions that raise property taxes, which would hamstring state and local governments struggling with fiscal problems from raising revenue to avoid cuts in public services.
House leaders are hoping to have a full bill ready for a floor vote in early May.