Different interest groups gave US President Donald Trump’s proposal of a tax overhaul a growing opposition on Sunday, while Republicans were paving ways to unveil a legislation that could lead to the elimination of some popular tax breaks to help in the payment of lower taxes.
The National Association of Home Builders (NAHB), an influential housing industry trade group, has indicated that it will oppose the bill, which will not be unveiled until Wednesday. It has vowed to defeat the said bill over a change that could impact the use of home mortgage deductions.
Meanwhile, the Republicans, who control the US House of Representatives, are trying to veer off the opposition to possible changes aimed at individual retirement savings and state and local tax payments.
The vow of tax reformation, which was proposed by Trump and Republicans, comes first since 1986. The plan is to deliver up to $6 trillion worth of tax cuts for businesses and individuals.
Republican from the House and the Senate are hurrying the approval of separate tax bills, aiming to finish them before the US Thanksgiving holiday on November 23. They are reserving December for the ironing out of differences, and January for the sending of a final version to the president’s desk.
If all goes according to plan, this will be the president’s first major legislative victory. However, analysts agree that the tax overhaul will likely be delayed until next year.
Proposal vs. NAHB
The NAHB sports 130,000 member firms, which collectively employ around 9 million workers. The association claims that the bill will negatively affect US home prices by marginalizing the value of mortgage interest deductions as an incentive for purchasing or owning houses.
“We’re opposed to the tax bill without the tax credit in there, and we’ll be working very aggressively to see it defeated,” said Jerry Howard, NAHB chief executive officer.
The association demands a tax credit equivalent to 12 percent of mortgage interest and property tax payments, although it says it was turned down by House Republican leaders.
Meanwhile, Kevin Brady, who is the top House Republican on tax policy, suggested that the NAHB credit could still be saved. Brady is also the chairman of the House’s Ways and Means Committee.
“I hope members of Congress will examine it closely to determine if they want it included,” said Brady.
Republicans have cautioned that the president’s tax plan is now in a rockier road and a more difficult phase as lobbyists are pressuring lawmakers to save some popular tax breaks.
“When groups start rallying against things and they succeed, everything starts unraveling,” said Senator Bob Corker, a leading Republican fiscal hawk.
Apart from NAHB’s opposition, another challenge stems from the proposal to remove the federal deduction for state and local taxes (SALT).
Analysts argued that the elimination of SALT would hit upper middle-class families in high income tax states like New York, New Jersey, and California.
Brady, on the other hand, said that he would permit a deduction for some local taxes to remain.
“We are restoring an itemized property tax deduction to help taxpayers with local tax burdens,” said Brady in a separate statement.
However, Brady’s promise didn’t do much to help quell the opposition to SALT’s removal.
“I’m not going to sign onto anything until the full package is fully analyzed by economists,” said Peter King, New York Representative. “The fact that we’re getting it at the eleventh hour raises real issues with me.”
Brady’s statement received further repudiation in the form of a lobby coalition, which represents state and local governments, realtors, and public unions. It said that the move would “unfairly penalize taxpayers in states that rely significantly on income taxes.”
Moreover, House Republicans have previously faced opposition from the president himself after attempting to propose a sharp reduction in tax-free contributions to 401 (k) programs, and move retirement savings to an account that allow tax-free withdrawals. This would replace the tax-exempt contributions that are more preferable among 401 (k) investors.
House Republicans are continuing the talks about tax-free withdrawals, although they said they could allow higher 401 (k) contribution limits. The current cap on annual contribution is $18, 000.
“We will expand the amount that you can invest. But we’ll also give you an option to actually not be taxed later in life,” said House Republican leader Kevin McCarthy.
“They’re having great difficulty just getting to $3.6 trillion,” said Corker, who promised to vote against the tax reform the moment it increased a federal debt load that is currently at over $20 trillion.
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