The revised tax bill that was approved by a House-Senate conference committee still has the same general shape as the versions that passed each house of Congress a couple of weeks back: giant tax cuts for the wealthy, small tax cuts followed by bigger tax hikes for everyone else, and cross your fingers and hope that that whole trickle-down economics thing works out better than it did for Kansas.
A few items, though, still needed to be reconciled between the differing House and Senate versions of the bills, which is what the conference committee action was about. The final verdict, which is approved by the full House and Senate today, is still largely the same bill that is overwhelmingly opposed by Americans as a giveaway to the rich, but provides marginally better news if you’re a New Yorker with a moderately high income, build affordable housing, or, best of all, own a pro sports team:
One of the big surprises in the House version of the bill was a plan to eliminate the ability to deduct state and local taxes on your federal form, a provision designed to target states like New York and California for, oh, no particular reason.
In the final bill, the “SALT” tax deduction is restored, sort of: New Yorkers will now be able to deduct a maximum of $10,000 per year in state and local income taxes (or sales taxes, whichever is higher) combined with state and local property taxes. This won’t help lower-income taxpayers, since under the new plan the increased standard deduction will mean those folks won’t itemize regardless, or house-rich taxpayers who were already going to max out their $10,000 deduction on property tax payments; Michael Leachman of the Center on Budget and Policy Priorities has calculated that 80 percent of the California residents who would have seen tax hikes under the House bill will still pay increased taxes under the compromise plan. But if you’re among the lucky few to earn enough not to itemize but not so much that you pay way more than $10,000 in state and local taxes, this provision is for you.
The bigger worry for Leachman and others remains that making rich New Yorkers double-pay taxes on their earnings will reduce states’ ability to raise taxes to pay for local needs, right as Donald Trump and congressional Republican leaders are preparing to cut federal support for state programs. “Capping SALT makes it harder for states to raise the revenue they need over time, especially in ways that are based on ability to pay, which could mean that already-regressive state and local tax systems could become more so,” says Leachman.
The compromise tax bill will spare the tax exemption that is used to finance the vast majority of subsidized housing projects in the city; its elimination in the House bill had been threatening to put more than $2 billion a year in affordable-housing funds for New York at risk.
Unlike the version the House passed in November, the final bill will preserve the exemption for private activity bonds “that are used to finance valuable infrastructure projects,” which will specifically include housing. The bonds, which are given to private enterprises considered to have a public benefit, enable developers to borrow money at lower interest rates, and more important, generate resellable tax credits that can pay for up to 40 percent of the cost of a project. Private activity bonds are used for about 85 percent of affordable-housing production in New York City and half nationwide, Ted Chandler of the AFL-CIO Housing Investment Trust told the Voice earlier this month.
Affordable housing finance is still at risk from the tax bill, though: By cutting the corporate tax rate from 35 percent to 21 percent, the new law will drastically reduce corporations’ incentive to buy tax credits from nonprofit developers. The mayor’s office tells the Voice that a corporate tax rate cut to 20 percent, the rate that had been proposed in previous versions of the bill, would cost the city $200 million a year in lost housing funds.
“We are relieved that the bill didn’t eliminate essential resources for affordable housing, but we will still feel the effects of lower equity pricing for affordable housing investment,” says Rachel Fee, executive director of the New York Housing Conference. “The city and state will either have to pick up the tab for lost equity or build fewer affordable housing units than planned as a result of this bill.”
The House version of the bill also contained a provision that’s been kicked around Washington, D.C., for about 30 years: a ban on using tax-exempt bonds for pro sports stadiums. Like for housing development, this tax break, which dates back to the Tax Reform Act of 1986 and has drawn criticism from everyone from the break’s own author to Barack Obama to the Heritage Foundation, enables sports teams to get lower interest rates for construction projects, something the Brookings Institution has estimated costs the federal government more than $200 million a year.
After the NFL publicly complained about losing the tax break (and, no doubt, other sports leagues did so privately), it was restored in the final version, meaning if the Boston Red Sox ever replace Fenway Park, Yankees fans will help pay for it with their federal taxes. (And every taxpayer in the nation will be contributing to Mark Davis’s new Las Vegas Raiders stadium.) There’s still a bill in the Senate that would accomplish the same thing, but don’t hold your breath — unless you’ve already been holding your breath for the last 31 years, in which case your heirs will be happy to learn that twice as much of your accumulated wealth will now be exempt from the estate tax.