On Wednesday, Republicans passed their finalized tax reform —which has been pushed through Congress over the last month in a rush to have the bill hit President Trump’s desk before Christmas.
The Senate approved the bill 51-48 early Wednesday morning. On Tuesday, the Republican bill was approved on a 227-203 vote in the House, with no Democrats supporting it. Twelve Republicans also voted against the measure.
However, the House had to revote Wednesday due to the Senate having to strip out some elements of the bill—passing the House once again 224-201 after a revote Wednesday afternoon.
In response to the passing of the biggest tax code overhaul in years, U.S. Treasury Secretary Steven Mnuchin released this statement:
“Today Congress delivered tax cuts to middle-income families and a level playing field for American businesses. I congratulate the House and Senate for passing this historic legislation, which will usher in higher wages and more jobs for American workers, a fairer system for all, and greater economic growth that will lead to a brighter and more secure future for our country. Thanks to the leadership of President Trump and our colleagues in Congress, hardworking Americans will keep more of their hard-earned money in 2018 and beyond.”
In agreement of the bill, U.S. Rep. Jeb Hensarling (R-Texas) said he fully believes the Tax Cuts and Jobs Act will deliver sustained strong economic growth, but he did express his apprehensions of the bill that the House and Senate finally agreed on.
"Although the Tax Cuts and Jobs Act failed to fully repeal the Death Tax and Alternative Minimum Tax and did not achieve the level of simplicity or flatness I had worked for, it remains a great and historic pro-growth achievement and I am proud to support it," Hensarling said.
“The Summary of Economic Projections revealed an upgrade of growth expectations for 2018 and 2019 but no change in the expected pace of rate increases or the so-called neutral rate,” said Duncan. “It appears there is not much economic boost anticipated by the Fed from tax legislation that passed December 20. While final details were not known at the time of the Fed meeting, the outline was quite similar to the final legislation.”
Chairman of the National Association of Home Builders (NAHB) Granger MacDonald expressed his support of the legislation, despite NAHB's previously reported concerns toward the bills initial announcement.
"NAHB fully supports the final conference report on tax reform legislation and commends the work of House-Senate conferees," MacDonald said. "This comprehensive overhaul of the nation's tax code will help middle-class families, maintain the nation's commitment to affordable housing and ensure that small businesses are treated fairly relative to large corporations. Lower tax rates and a fair tax code will spur economic growth and increase competitiveness, and that is good for housing. We urge the House and Senate to move quickly to pass this legislation."
After the passing on the bill by the Senate and the House (the first time) David H. Stevens, President and CEO of the MBA, offered the following statement lauding the inclusion of important real estate provisions in the conference report for HR 1.
"I want to thank House and Senate leadership and the members of the conference committee for including key real estate and housing provisions in the final tax bill. Specifically, we are grateful for the amendment to Section 13221 of the original Senate-passed bill offered by Senator Mike Rounds, to create an exception for any item of gross income in connection to a mortgage servicing contract."
National Association of Federally-Insured Credit Unions (NAFCU) President and CEO Dan Berger released the following statement regarding H.R. 1.
"NAFCU and our member credit unions sincerely appreciate the willingness of the Trump administration, Treasury Secretary [Steven] Mnuchin, Chairman [Orrin] Hatch, Chairman [Kevin] Brady and members of Congress to meet with us and hear our concerns throughout this process,” Berger said. “With the industry's tax exemption untouched, credit unions will be able to continue serving their communities and remain a key player in the financial services arena.”
However, some of the reactions were in major opposition. According to Portland Business Journal, Oregon Gov. Kate Brown said she is "absolutely appalled."
"This massive tax deal gives big corporations and the wealthy elite a break while adding over a trillion dollars to the national debt that our kids will have to pay," said Brown.
Additionally, Daniel Hauser of the Oregon Center for Public Policy expressed a similar view.
"Today’s tax vote in Congress makes one thing absolutely clear: a majority in Congress place the interests of corporations and the rich ahead of ordinary folks and the nation," Hauser said. "The travesty that is the GOP tax plan is well-documented. It showers corporations and the rich with tax cuts while offering working families small benefits."
Finally fulfilling a legislative priority of a GOP-led Congress, the finalized tax reform could go down in history as the most substantial overhaul of the American tax code since the Regan Administration—only time will tell how the new legislation will stir the housing industry.
To view the full agreement, click here.
Here's a look at what the changes mean for homeowners, buyers, and sellers:
- Downsized mortgage interest rate deduction: New homebuyers would now only be able to deduct interest on the first $750,000 of mortgage debt on a newly-purchased home—down from the current $1 million thresholds, but higher than the $500,000 limit the House proposed in its tax overhaul in November. While the deduction has helped make homebuying more affordable for some homeowners, buyers in some cities face much higher price tags.
- Less reason to itemize: Homeowners must itemize their taxes if they want to claim the mortgage interest deduction. But since the final bill calls for nearly doubling the standard deduction, far fewer Americans are expected to itemize.
- Limit on property tax deduction: Taxpayers will no longer be able to fully deduct state and local property taxes plus income or sales taxes. Instead, the legislation allows individuals to deduct up to $10,000 in state and local income and property taxes or state and local property and sales taxes. That means homeowners living in high-tax states like New York, California, and New Jersey could see an increase in what they owe.
- Tax break stays for home sellers: Both the House and Senate bills originally wanted to scale back a tax break for homeowners when they sell their home for profit. Taxpayers will still be able to exclude up to $500,000 (or $250,000 for single filers) from capital gains when they sell their primary home, as long as they've lived there for two of the past five years. Earlier tax reform proposals would have increased the live-in requirement to five out of the last eight years.