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There has been a lot of turnover in Congress since the 2017 Tax Cuts and Jobs Act (TCJA), a major law with provisions that the National Association of REALTORS® supports because they benefit homeowners and the real estate economy. But as some provisions are set to expire on Dec. 31, NAR has a window to explain to lawmakers—especially new members of Congress who aren’t familiar with the work that went into the TCJA—how the law helps consumers and why certain real estate provisions should be included.
That was the sentiment last week at NAR’s Policy Forum, which capped the association’s inaugural Advocacy Week. Congressional lawmakers and leaders of housing trade groups came together to discuss how tax reform can continue to elevate the American Dream.
"It's been said that if you want to see what a nation values, look at its tax laws,” said Sara Lipnitz, NAR VP of Advocacy. “The tax code should give people incentives to achieve homeownership, and our tax code is an important driver of boosting homeownership."
Americans are set to say goodbye at the end of the year to TCJA benefits like lower income tax brackets, larger child tax credits and a 20% deduction on qualified business income.
Barbara Angus, who was the chief tax counsel to Republicans on the House Ways and Means Committee in 2017, shared her “elevator pitch” for the TCJA to those in positions of power: “[Don’t] let taxes rise on families or on small businesses. We need to make sure that families continue to keep more of their income to spend on the things that are important to them, and that the small businesses that are in the housing sector are able to increase their investment.”
Panelists and speakers at the Policy Forum shared their predictions on hot-button issues like raising the state and local tax (SALT) deduction and enhancing the capital gains exclusion.
The 2017 law limited the SALT deduction to $10,000 for both single and married tax filers and preserved prior law on capital gains exclusions. NAR helped successfully preserve the capital gains exclusion against detrimental revisions.
“[SALT] is an issue that doesn’t fall neatly along party lines,” said Anna Taylor, deputy leader of Deloitte’s Tax Policy Group who previously served as Sen. Chuck Schumer’s chief tax advisor. She explained that Schumer and Republican leaders in the House have been trying to increase the SALT cap for years without success. “I think [Congress] will find some middle ground. I don’t know if anybody will be happy with what that middle ground is, but I do expect the cap will come up at least a little bit.”
As for the exemption of capital gains on the sale of a primary residence, those limits—$250,000 for single tax filers and $500,000 for married couples filing jointly—haven’t been revised in nearly three decades.
“It just so happens that we’ve had enough inflation since 1998 that the real value of that $250,000 exclusion or $500,000 for a married couple has been halved,” said Ryan Ellis, former director of Americans for Tax Reform. “So, one of the things that we’re urging—and I think it’s a quite reasonable ask—is maybe we ought to focus on doubling that.”
Ellis laid out the domino effect a revision like that can have on boosting housing supply:
“How many boomers and older Gen X-ers are sitting in houses, people you probably know, they’re sitting in houses that they raised their families in. They would love to sell those houses. They don’t want to deal with stairs, they don’t want to deal with snow. You know why they can’t sell? Because people like me—tax nerds in their lives —are telling them don’t sell because you’re going to have a giant capital gains tax when you sell it. Oh, by the way, if you die [while owning] the house, your kids will inherit it tax free because of step-up in basis rules. So, there’s no incentive on the part of boomers and older Gen X-ers to sell these single-family homes. You know who would love to buy a single-family home? Millennials and Gen Z families that are looking to get into the housing market for the first time.”
Throughout the forum, thought leaders presented both the financial and political hurdles extending the TCJA as-is faces. An extension of the tax bill is estimated to cost the federal government between $4 trillion and $5 trillion over a decade, according to recent projections.
The bill has an easier-than-typical route to getting passed through a process known as “budget reconciliation,” which requires only a simple majority in both houses to pass legislation.
And while Republicans have the scales tipped in their favor, that doesn’t mean the process will be swift—particularly in the House where there are two vacancies and Republicans hold a slim one-seat margin.
Speakers noted that if no Democrats vote to extend the TCJA, it’s possible that some Republicans will use their votes as leverage to attach their own priorities to the bill, potentially delaying the process.
“We want to get this bill done by Memorial Day—first 150 days,” said Stephen Moore, an economist with the Heritage Foundation. “And whether it’s going to be one big, beautiful bill or three bills, I don’t care. It just has to get done; the earlier, the better.”
Adam Carasso, former tax counsel to Democrats on the Senate Finance Committee, predicts Republicans will pass legislation, even if it “may take a few go-arounds.” He added that a Memorial Day timeline is unrealistic.
“This is really, really hard to do. It’s far harder now than it was, I think, in 2017 because the deficit picture is so, so bleak,” Carasso said. “I would like to see folks not handicap this Congress and administration on the speed. It should be done right rather than done too quickly.”
JP Delmore, assistant vice president of government affairs at the National Association of Home Builders, also encouraged patience. “Don’t freak out if the first attempts to launch on the budget resolution don’t work out. I think they will get there at the end,” he said.
