Washington Post columnist, E.J. Dionne, Jr. wrote that this week's nice-playing in the U.S. Senate "represents a major advance for those who want government to do its job." And by do its job, he means stop obstructing what the other side proposes and entertain the will and the needs of the people.
For years now -- going on decades -- Congress has handed their power over to others. There are international examples, like when our elected officials gave President Bush their constitutional power to wage war in Iraq. And there are domestic examples, like when Congress formed a Super Committee to get us out of fiscal hot water. In both cases Congress shirked its responsibilities and we as a nation are paying rather bitterly for their dereliction of duty.
No random web searches explained the new found détente that Dionne heralds in his column, but it seems to have started sometime before this week. At least in the case of two Senators who have decided that the U.S. tax code needs changing and absolutely nothing is sacred. Senate Finance Chair Max Baucus (D-MT) and Ranking Member Orrin Hatch (R-UT), have put the call out for any and all suggestions on how the tax code should be written or re-written. And the deadline for sharing ideas with the Senators is the 26th of July.
In order to start with a blank slate, the senators are willing to wipe some old staples off the board: charitable contributions and home mortgages, to name two.
Baucus and Hatch hope to build a new tax structure and if any of the old deductions make it to the new code, they'll have to be presented and put back on the list.
If these senators are true to their word -- that they will build a tax structure based on public input and sensible policy -- this could be a really big opportunity for folks in the housing business that can mobilize public comment. And what's good for public housing is good for the economy.
Recently and all across Pennsylvania, the staff of the Housing Alliance of Pennsylvania (HAP) has been reaching out to public housing advocates and providers enlisting their help contacting Senators Baucus and Hatch. HAP wants the home mortgage interest deduction (MID) changed to a tax credit. Lots of people use the MID and don't really think of themselves as recipients of a housing subsidy. But they should. The MID is the largest housing subsidy in the nation, benefiting millions of homeowners, and paid for by taxpayers.
Housing subsidies are thought of as a way to get the poor better housing, but in the case of the MID it works the other way around, it disproportionately helps those with more assets because a tax payer must itemize their taxes deductions in order to receive the MID. And as it stands now, the MID can be taken by folks with mortgages up to $1million. Consequently, according to the National Low Income Housing Coalition, 77 percent of this benefit goes to homeowners who earn more than $100,000 per year.
Here's what HAP and their partners at NLIHC would like you to ask for when you call congress. Firstly, the tax deduction needs to be a tax credit so that the lower income tax payers may benefit. Secondly, the $1 million dollar cap needs to be lowered to $500,000.
The income calculator at CNN Money recommends an income in excess of $300,000 for a $1 million dollar mortgage and an income in excess of $220,000 to mortgage half that amount. But a low-income taxpayer, earning $34,000 can borrow $67,000 for a home and the more of those purchases we have, the sooner we can start rebuilding the economy. Stunningly, unless Baucus, Hatch, and the rest of congress change the law, that low income home owner will not be able to benefit from the same type of home subsidy the person earning $220,000 gets.
What will happen with the additional tax revenue generated by cutting off the deduction at mortgages of a half million? Well HAP and NLIHC recommend that the $5 billion generated by that change -- and that's billion with a b -- be placed in a National Housing Trust Fund. They predict that in Pennsylvania alone, that money could provide approximately 9000 homes for the commonwealth's most needy families and create 15,000 new jobs.
Liz Hersh, Executive Director of HAP says that the, "erosion of government as a partner" in housing and other necessities, "has impeded our ability" to eliminate homelessness. Hersh believes Senators Baucus and Hatch have opened the door to rebuild that partnership. Hersh urges voters to contact them supporting the National Housing Trust Fund via common sense tax reform.