Republicans released a massive tax-reform plan Nov. 2 that President Donald Trump hailed as “a great day for the American worker,” while some business trade groups contend it slams the middle class and could hurt some plastics-related industries.
The 429-page, $1.51 trillion plan dubbed the Tax Cuts and Jobs Act calls for new tax rates and brackets for individuals and permanently lowering the corporate tax from 35 percent to 20 percent as part of a sweeping overhaul.
The lower corporate tax rate was a priority of the Plastics Industry Association along with preservation of the tax credit for research and development and the ability to use 529 education savings for apprenticeship programs. The Washington-based trade group represents about 1 million workers in a $418 billion U.S. industry.
“Allowing families to use the post-secondary education savings for good-paying, quality career options in the manufacturing sector will help address the industry workforce needs and help provide career options for those that may not be best served by four-year university degree programs,” Bill Carteaux, president and CEO of the trade group, said in a news release.
Proponents say tax reform will help U.S. businesses compete better globally. But critics caution that lawmakers could be picking winners and losers with the plan expected to be on the president's desk for a signature by the end of December.
The construction industry appears to be an early loser. Both the National Association of Home Builders (NAHB) and the Window & Door Manufacturers Association quickly voiced opposition to the plan because it seeks to reduce the cap on the mortgage interest deduction from $1 million to $500,000 and limit deductions for state and local property taxes at $10,000. Opponents say those changes will make it harder for people to buy homes, especially upscale houses in some places.
“The House Republican tax reform plan abandons middle-class taxpayers in favor of high-income American and wealthy corporations,” NAHB Chairman Granger MacDonald said in a statement. “The bill eviscerates existing housing tax benefits by drastically reducing the number of home owners who can take advantage of mortgage interest and property tax incentives. And capping mortgage interest at $500,000 for new home purchases means that home buyers in expensive markets will effectively lose this housing tax benefit moving forward.”
WDMA President and CEO Michael O'Brien said limiting the mortgage interest deduction (MID) could be detrimental to the overall economy, too, and his group, which includes manufacturers of vinyl, fiberglass and composite windows and doors, would fight changes.
"The MID not only helps consumers, particularly middle-class taxpayers, buy a home but also allows them to deduct interest on home equity loans, which are frequently used to replace windows and doors with energy-efficient replacements,” O'Brien said in a statement. “Republicans repeatedly declared their intention of preserving the MID, yet this bill makes several changes that could undermine this cornerstone of American housing policy. We remain opposed to attempts to weaken the MID and will be working to ensure this popular and beneficial tax deduction remains intact as currently written in the tax code."
NAHB had been working with the Ways and Means Committee on a proposal that MacDonald said was killed by the House leadership.
“It would provide a robust home ownership tax credit that would have helped 37 million additional home owners who do not currently itemize,” he said. “Most of them are low- and moderate-income home owners. Meanwhile, as corporations receive a major tax cut, small businesses, which generate the lion's share of job growth, get limited relief. The bottom line: Congress is ignoring the needs of America's working-class families and small businesses. And by undermining the nation's longstanding support for homeownership and threatening to lower the value of the largest asset held by most American families, this tax reform plan will put millions of home owners at risk.”
NAHB Chairman Jerry Howard is urging Congress to enact housing finance reform next “to ensure the federal government continues to provide a backstop for a reliable and adequate flow of affordable housing credit in all economic and financial conditions.”
Howard said in a news release that lawmakers need to establish a new secondary market system for conventional mortgages and provide an equal playing field for small lenders among other reforms.