Tax Reform, Housing Policy, & Race

You’re probably hearing a lot about tax reform right now. You’re hearing about tax cuts for the middle class from the GOP, and if you’re paying enough attention, you’re also hearing about some changes to the tax code that will cancel those out. For our purposes, we’ll be talking specifically about the implications of the mortgage interest and property tax deductions.

Here is how The New York Times describes it:

To help pay for the lower tax rates and higher standard deduction, the bill eliminates most itemized deductions, keeping in place just three — deductions for mortgage interest, charitable contributions and state and local property taxes. The mortgage interest deduction would be capped for newly purchased homes up to $500,000, and the property tax deduction would be capped at $10,000.

In the days and weeks to come, you’ll also learn the housing industry (i.e. realtors, builders) don’t like this–nor do homeowners in states with high property taxes and home values. Why? Because one of the big incentives for people to buy homes is the the ability to write off the mortgage interest and property taxes. Maintaining a home is expensive, and if you can’t write off some of the carrying costs at tax time, it doesn’t always make financial sense. And if you’re paying high property taxes–to fund the roads, schools, and police departments your kids use–it only seems fair that you should get a little break on your federal taxes.

Homeownership is, traditionally, how Americans build wealth. You buy a house, you live in it for 10 years–or 30–and you sell it at, hopefully, a large profit when you’re ready to move. Then you can either buy a bigger better house, or put the money in the bank to fund your retirement or pass on to your children. Think about the crisis that ensued in 2008 when home prices crashed. What would happen if your property value plummets simply because there is no longer makes financial sense for someone else to buy it off of you.

Historically, housing policy has done its damnedest to keep black Americans from using this same path to wealth. Discriminatory lending, redlining, and blockbusting made sure our black and white grandparents didn’t mix in their neighborhoods–and often kept black people from either buying homes in the first place, or made sure their property didn’t appreciate at the same rates.

It’s a complicated history, and it would take more time than we have here to explain it all, but we have a few in-depth resources for you:

Homeownership among African Americans has been on the decline, and according to Forbes, is at “levels not seen since before passage of the Fair Housing Act of 1968…” From 2000-2015 black homeownership dropped to 41%, while the rate of white homeownership hovered at 71%. Part of this was the housing crisis. Some of it is about gentrification. A lack of affordable housing is also a problem across the board. But one thing is for sure, no one foresees growing homeownership for any community if you take away the incentives.

And if people aren’t buying houses, then that means no one is building new homes…which means less good paying, blue collar jobs. It’s hardly what candidate Trump promised. And it’s why you need to be calling your elected officials to tell them a vote for a tax plan that helps millionaires get richer on the backs of the middle class will cost them your vote on election day. 

Find your members of congress here.

To learn more about the Trump tax plan, go here.

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