Last week, Chairman of the Senate Finance Committee Max Baucus (D-MT) and Ranking Member Orrin Hatch (R-UT) announced their plan for tax reform legislation in the U.S. Senate. The two Finance Committee leaders said in a letter to all senators they would start from a “blank slate” to create new tax legislation in the committee.
Blank slate The blank slate means that as a starting point, all tax expenditures (including tax deductions such as the mortgage interest deduction, tax exemptions such as the capital gains exemptions on the sale of a primary residence, and tax credits such as energy efficiency tax credits) will be removed from the tax code. Senators will have to request tax expenditures be added to the reform legislation, which would raise tax rates. Using a “blank slate” approach allows the Senate Finance Committee to highlight just how much tax rates could be reduced by eliminating all the tax expenditures.
Next steps Senators have until July 26 to submit requests to the Finance Committee, which will then begin drafting a tax reform package. The committee is expected to present a completed draft for review and possible legislative action in September.
How does this affect REALTORS®? A wide range of provisions in the tax code affect residential, investment, and commercial real estate, so NAR is taking the lead to defend each of those tax provisions.
Media speculation In the coming days, there will be a lot of coverage in the media, social media, and blogs saying provisions like the mortgage interest deduction will be eliminated. Please be assured that NAR and CAR will work hard to ensure that real estate tax provisions are maintained in any rewrite of the tax code. Passage of tax reform is far from certain, and many of the reports in the media will be attempts to speculate what might happen. It’s important to remember, it’s just speculation.