After reviewing the sweeping tax overhaul outlined by the White House and Republican leaders in the House and Senate last week, it is clear that certain aspects of the proposal will adversely affect the commercial and residential real estate markets across America.
Major cities as well as surrounding areas would be impacted. REBNY stands with the leading organizations that represent state and local governments at the federal level – including the National Association of Counties, National Governors Association, National League of Cities, The U.S. Conference of Mayors, among others – in opposition to one key element of the plan.
Along with major education, public safety, and realtor organizations, they have expressed deep concern about the adverse economic impacts that the plan’s elimination of state and local tax deductibility (SALT) would have on their constituents and municipal services. SALT is vital for middle class homeowners and taxpayers who reside in both Democratic and Republican congressional districts throughout the 50 states. Middle class taxpayers receive the majority of the benefits from SALT.
Of the 44 million taxpayers who claimed the deduction, nearly 86 percent had an adjusted gross income of under $200,000 and more than 50 percent of the total dollar value of SALT goes to them. The loss of SALT would increase taxes for middle class filers by an average of $815 a year, not quite what has been claimed for a tax plan supposedly designed to benefit the middle class.
The elimination of SALT will also negatively impact the ability of state and local governments to finance basic services, especially education, public safety, and infrastructure across the country.
The National Association of Realtors argues that this proposal will increase the cost of homeownership, thereby reducing home values across the country and creating a chilling effect on local residential real estate markets.
The SALT deduction has been in place since the commencement of the income tax in 1913 and has its roots in an 1862 emergency tax to fund the Union’s Civil War efforts. For over 150 years, every tax form ever issued by the US federal government has included the deduction of state and local taxes – showing its critical role in our federal system. There is simply no compelling reason for breaking with a century and a half of established practice on this issue and violating a fundamental principle of a fiscal federalism.
It has been argued by elected officials who favor SALT’s elimination that this middle class tax benefit is really a subsidy of high-tax states, like New York, New Jersey, Connecticut, and California. This oft-repeated argument is simply false. Every major study has shown that it is the high-tax states, like New York, that contribute far more in tax revenue to the federal government and other states than they receive.
We have a negative balance of payments to Washington – certainly not a subsidy.
All in all, the elimination of the state and local tax deduction would be a damaging blow to the health of middle class taxpayers, homeowners, as well as state and local governments across the country.
Any serious analysis of the elimination of SALT, as this tax plan proposes, would show it to be harmful and costly for not only New York, but for all American local governments – cities, counties, and school boards.
In other REBNY news:
Technology innovators have the opportunity to win up to $75,000 in cash and prizes, and connect with #REBNYTech companies interested in funding new PropTech innovation, by building the future of PropTech at our first ever #REBNYTech Hackathon coming up on Friday, October 13th through Sunday, October 15th at the Urban Tech Hub at Grand Central Tech (335 Madison Avenue) during NYC Real Estate Tech Week. To register your startup or tech company team, visit rebnytechhack.splashthat.com.
Network and hear industry leaders speak about the future of the New York City retail market at our upcoming REBNY Members’ Luncheon, “What’s ‘in Store’ for NYC Retail,” to be held on Wednesday, October 18th from 11:45 a.m. to 2:00 p.m. at the New York Hilton Midtown (1335 Avenue of the Americas, Grand Ballroom). Moderator Robin Abrams, Vice Chairman of Retail at Eastern Consolidated, will be joined by experts Michael Goldban, Senior Vice President of Retail Leasing at Brookfield Office Properties; Brad Mendelson, Vice Chairman at Colliers International; and Richard Wagman, Managing Partner at Madison Capital. To purchase tickets or a table at the event visit REBNY.com and register online. Contact CommercialBrokerage@rebny.com for information on current and future sponsorship opportunities.
“Go West” at our 29th Annual Residential Deal of the Year Charity & Awards Gala, to be held on Thursday, October 26th from 6:00-10:30 p.m. at Metropolitan West (639 West 46th Street). The biggest celebration of the year for REBNY’s Residential Brokerage Division will honor the industry’s best and brightest leaders and dealmakers, and a portion of the proceeds raised at the charity event will benefit REBNY’s “Member in Need Fund,” which provides grants to residential members who are experiencing a financial crisis or hardship. To reserve your ticket or table, visit rebny.com. For sponsorship opportunities, email Jeanne Oliver-Taylor at JTaylor@rebny.com.
On Friday, October 27th, 9:30 to 10:30 a.m. at our next REBNY Rental Clinic, Jesse Rhinier of City Connections will moderate a discussion among panelists Daniel Itingen of Bold New York, Gary Kiyan of Perfect Solutions Real Estate, and Karla Saladino of Mirador Real Estate on navigating the increasing owner-paid commissions market. This free-for-members event will take seasoned and new agents through the process of working in this OP environment. Register on rebny.com.