House Republicans Unveil Tax Bill; MBA Expresses Concerns over Mortgage Interest Reductions

House Republicans on Thursday released deals of the largest tax bill since 1986 that reduces the mortgage interest deduction and cuts corporate tax rates.

The 429-page bill, known as H.R. 1, the Tax Cuts and Jobs Act (https://waysandmeansforms.house.gov/uploadedfiles/bill_text.pdf) would touch nearly every element of the American economy–individuals, families and businesses–albeit in very different ways.

The Mortgage Bankers Association issued a statement supporting the concept of tax reform but taking exception with several elements of the proposed bill, including reductions to the mortgage interest deduction, deductibility of real estate taxes and certain capital gains.

“The Tax Cuts and Jobs Act will deliver real relief for people in the middle–and people who are also striving to get there,” said House Speaker Paul Ryan, R-Wis. “With this plan, we are getting rid of loopholes for special interests and we are leveling the playing field. We are making things so simple that you can do your taxes on a form the size of a postcard. With this plan, we are making pro-growth reforms so that yes, America can compete with the rest of the world. But we’re also making it so that families like these that are here can have more take-home pay.”

House Democrats saw it differently. House Minority Leader Nancy Pelosi, D-Calif., said the bill would “ransack” middle-class benefits and add trillions to the deficit.

“This is a shell game, a Ponzi scheme that corporate America will perpetrate on the American people,” Pelosi said. “But if you’re the wealthiest 1 percent, Republicans will give you the sun, the moon, and the stars–all of that at the expense of the great middle class.”

Of most interest to the real estate finance industry, the bill would preserve the home mortgage interest deduction for existing mortgages, but would the interest taxpayers could deduct from their taxes on new mortgages, capping it at $500,000. The cap is now $1 million. The bill also caps the deduction for state and local property taxes at $10,000 and repeals the deduction for state and local income and sales taxes.

In a statement, MBA President and CEO David Stevens, CMB, said MBA has “serious concerns” about how the proposed provisions could impact housing markets.

“In particular, we believe that the proposed changes to the mortgage interest deduction, deductibility of state and local real estate taxes and the exemption for capital gains treatment when families sell their principal residence would have a negative impact on the housing market and potentially the national economy as a whole,” Stevens said. “We are also concerned about the potential impact of certain provisions on the production of affordable housing, which is vital.”

Stevens reiterated MBA’s strong support of enacting tax reform that spurs jobs and economic growth, and the introduction of this bill is an important milestone on that road. “On the positive side, we appreciate the bill retaining the deductibility of business interest for real estate, section 1031 like-kind exchanges for real property and the low income housing tax credit that are important to maintaining strong housing and real estate markets,” he said.

Stevens noted the tax bill “is the opening bid in the discussion on tax reform and we look forward to continuing to work with policymakers to find the right balance that both reduces the tax burden on American families and spurs economic growth, without posing unnecessary risk to the housing and real estate markets.”