Washington Update - 02/27/2009 (Plain Text Version)

View Graphical Version | Subscribe to NAHB Publications | E-mail Our Editor
NAHB Home Page | Browse Other NAHB e-Newsletters | Search Back Issues

Obama's $3.6 Trillion Budget Hits Mortgage Interest Deduction

President Barack Obama on Thursday unveiled a $3.6 trillion budget that would raise taxes on American families earning more than $250,000 and reduce the value of their mortgage interest and real estate tax deductions to help pay for a $634 billion health care fund for the uninsured. Obama said this year's deficit would increase to $1.75 trillion and fall to $533 billion by the end of his first term and that his budget blueprint provides investments in health care, energy conservation and education to modernize the nation's economy in the long-term. "What I won't do is sacrifice investments that will make America stronger, more competitive and more prosperous in the 21st century -- investments that have been neglected for too long. These investments must be America's priorities," Obama said.

After the President announced his budget plan, NAHB Chairman Joe Robson issued a media statement highly critical of the Administration's proposal to reduce the value of the mortgage interest and real estate tax deductions for home buyers and home owners in order to pay for an expanded health care initiative. Robson's comments were as follows:

“With the housing market still reeling from its worst downturn since the Great Depression, this is not the time to talk about raising taxes on home buyers and home owners. This proposal will increase the cost of housing for many middle-class families, particularly in high-cost areas such as California and the Northeast, which will only further undercut the housing market, exert more downward pressure on home values and work against the President’s efforts to stabilize housing and turn this economy around.

“The proposed budget would also tax a ‘carried interest’ as ordinary income, which could significantly impact the multifamily and commercial real estate sectors at a time when they are already experiencing a severe downswing. At this critical point in the recession, we should be doing everything we can to stimulate demand in housing and avoid proposals that would reduce housing affordability and further destabilize prices.

“The notion of ‘robbing Peter to pay Paul’ just won’t work. Not when the stakes are so high with our economy. This week alone, existing home sales dropped another 5.3 percent and new homes sales plunged 10.2 percent. The month supply of unsold homes is at an all-time high. Financing health care reforms by chipping away at the mortgage interest and real estate tax deductions is certainly not the answer. This will only hurt the ailing housing market and U.S. economy."

Obama is expected to send Congress a complete budget plan in April and Congress is not anticipated to approve the fiscal year 2010 budget until later in the year. Given the size, cost, complexities and major policy overhauls that this blueprint entails, the budget battle in the weeks and months ahead is likely to be contentious as lawmakers on both sides of the aisle debate its merits on an array fronts, from social spending, to energy policy to taxes.

In a press release commenting on the President's budget, Senate Finance Committee Chairman Max Baucus (D-Mont.) praised the plan but expressed similar concerns raised by NAHB. "Some of the reforms and offsets contained or referenced in the budget, such as the limitation on itemized deductions, raise concerns and will require more study as we determine the best policies for getting America back on he track," he said.

Below is a snapshot of tax and spending items of interest to the builder community that is included in Obama's proposed budget:

Taxes

Limits the mortgage interest deduction, real estate tax deductions and all other itemized deductions for couples making over $250,000 and single taxpayers earning more than $200,000
- A tax increase for home owners, home buyers, as well as small business taxpayers who report income on their individual income tax return
- Significant impact in high-cost areas
Taxes carried interest as ordinary income
Increases the capital gains tax to 20% for couples earning more than $250,000
Provides an expansion of net operating loss (NOL) carry back for all businesses (stimulus legislation limited this to small businesses)

Appropriations

Increases funding for green jobs
Adds more weatherization funding
Provides more funding for OSHA enforcement
Mandates employers to re-enroll employees in retirement accounts
Creates more lobbying restrictions and databases
Eliminates a HUD low income housing program
Provides full CDBG and Section 8 funding
Funds the Affordable Housing Trust Fund (Fannie Mae and Freddie Mac money is now gone so this becomes a direct appropriation)
Creates a HUD energy innovation fund to create an “energy efficient housing market”

NAHB will remain deeply engaged as the budget process moves forward and fight to strip out any provisions that will harm housing and promote elements that will help small businesses and the housing sector. For more information on the tax components in the budget, contact Greg Brown at 1-800-368-5242, x8421. For information on specific housing and spending programs, contact Jenna Hamilton at x8407.

Card Check Legislation Introduced in House and Senate

On Feb. 25, Reps. John Kline (R-Minn.) and Tom Price (R-Ga.) introduced H.R. 1176, the Secret Ballot Protection Act, legislation that would create a firewall against the “card check” legislation that congressional Democrats are expected to introduce within the next few weeks. The Secret Ballot Protection Act would ensure that workers are always given the opportunity to participate in a secret ballot vote when deciding whether to organize into a labor union. Reps. Kline and Price are the top Republicans on the Health, Employment, Labor, and Pensions Subcommittee and the Workforce Protections Subcommittees of the House Education and Labor Committee. The legislation was introduced with more than 100 cosponsors. Senators Jim DeMint (R-S.C.) and Mike Enzi (R-Wyo.) have introduced companion legislation in the Senate along with 16 Senate cosponsors.

The Secret Ballot Protection Act seeks to act as a counterbalance to the Employee Free Choice Act (EFCA), the confusingly-named legislation that would eliminate the requirement that unions and the National Labor Relations Board (NLRB) allow for a secret ballot vote among workers when organizing a workplace to join a union. In the last Congress, EFCA passed the House but was unable to clear the Senate, and then-President George Bush indicated that he would have vetoed the measure if it reached his desk.

Labor unions continue to push for passage of EFCA as their number one legislative priority for the 111th Congress, and lawmakers who support that measure are presently strategizing over how best to proceed. It is widely believed that the EFCA effort will begin in the Senate this time around, with many House lawmakers uninterested in having to vote on the controversial measure until the Senate can show that it can be passed. NAHB passed policy in the spring of 2008 opposing EFCA, and any effort to eliminate the secret ballot requirement on labor union organizers. For more information, contact Jenna Hamilton at 1-800-368-5242, x8407. [return to top]

Senate Panel Hears Pleas for Aggressive National Building Codes

The Senate Energy and Natural Resources Committee on Feb. 26 heard testimony from various efficiency advocates asking for Congress to enact national building codes that exceed the existing International Energy Conservation Code (IECC) by 50% for both residential and commercial buildings. Chairman Jeff Bingaman (D-N.M.) convened the hearing to discuss ways to improve building efficiency and to get the federal government engaged in implementing stricter construction standards for private buildings.

Witnesses from the National Association of State Energy Offices (NASEO), Architecture 2030, and the American Council for an Energy Efficient Economy (ACEEE) all agreed that the federal government must enact national code requirements that exceed existing I-Codes because the adoption of individual codes on a state by state basis was not working effectively. None of the building industry trade groups was invited to testify at the hearing, but many, including NAHB, are weighing directly with committee members on the issue of codes in advance of upcoming energy legislation that will likely attempt to mandate aggressive nationalized codes for residential and commercial buildings. Testimony from the hearing witnesses is available by clicking here. For more information, contact Elizabeth Odina at 1-800-368-5242, x8570. [return to top]

House Postpones Mortgage Modification Vote

With the House set to consider H.R. 1106 on Feb. 26, NAHB sent a letter to House members urging lawmakers to enact any changes to the bankruptcy code in a careful manner that will have a positive impact on the marketplace. The letter said that provisions of the bill that relate to mortgage loan modifications by bankruptcy judges should “be limited in scope, temporary, and apply only to current mortgages.” NAHB urged lawmakers to further narrow the bankruptcy provisions in H.R. 1106 in order to “focus only on those mortgages responsible for the surge in defaults.” The House subsequently postponed a vote on the bill and is now set to consider the measure next week. For more details, contact J.P. Delmore at 1-800-368-5242, x8412. [return to top]

Builders Work to Defeat ESA Rider in Senate Spending Bill

NAHB is currently working to defeat a rider added onto the Omnibus Appropriations bill (H.R. 1105), which passed the House this week. Section 429 would allow the Interior Department to withdraw two Endangered Species Act rules (one on Section 7 consultation and another on polar bears) within 60 days of enactment. This would allow the Obama Administration to change rules without any public notice or public comment period. The Section 7 consultation regulations, under the Endangered Species Act, were finalized in December and became effective last month. These regulations aim to reduce permitting delays, especially for informal interagency consultations. The new rule requires informal consultations to be completed within 60 days, with a single 60 day extension. Without these deadlines, informal consultations can often take over a year. The new rules will greatly speed up the federal permitting process for builders.

NAHB is working closely with the National Endangered Species Act Reform Coalition to defeat this rider in the Senate. For more information, contact J.P. Delmore at 1-800-368-5242, x8412. [return to top]