President Barack Obama on Feb. 26 unveiled a $3.6 trillion budget that would raise taxes on American families earning more than $250,000 and reduce the home mortgage interest and real estate tax deductions to help pay for a $634 billion health care fund for the uninsured.
Although I have broken the blow of this otherwise smooth and informative article, I feel compelled to insert an opinion and a question. Those of the electorate who ignored all the available evidence (including Joe the Plumber), threw logic out the window and voted for Hope You Can Believe In, are getting what they deserve: a socialist American President. If it were only the foolish who voted for Obama that had to pay for that folly, I wouldn’t have a problem with it. But, all Americans, in fact, most citizens of the world will suffer under Obama. To those of you who smack talk Trickle Down Economics in your class-warfare-like manner, please remember that nothing trickles up and a rising tide really does lift all boats. Instead, we’ve got holes in the boat and an incompetent at the helm, steering a steady course to trillions of dollars in entitlement programs. Way to go folks.
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 massive entitlement programs, 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. Only investments really translates into Entitlements.
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 ‘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% and new homes sales plunged 10.2%. The months 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 of 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 concerns similar to those 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 the track," he said.
Following is a snapshot of tax and spending items of interest to the builder community that are 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 and 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, fighting to strip out any provisions that will harm housing and promoting elements that will help small businesses and the housing sector. For more information on the tax components in the budget, e-mail Greg Brown at NAHB, or call him at 800-368-5242 x8421. For information on specific housing and spending programs, contact Jenna Hamilton, x8407.