President Trump’s Simplifications to Tax Code Are Key to Economic Growth
Last week President Trump unveiled his plan for the “biggest individual and business tax cut in American history.” However, it still didn’t take long for special interests to decry the administration’s efforts centered around tax reform and economic growth.
The National Association of Realtors (NAR) quickly took issue with President Trump’s proposal to double the standard deduction and eliminate the state and local deduction. Their claim: President Trump’s proposal would “nullify the current tax benefits of owning a home for the vast majority of tax filers,” disproportionally hurting middle and low-income homeowners.
Given a doubled standard individual deduction, many homeowners will opt for higher savings in a standard deduction as opposed to claiming an itemized mortgage interest deduction (MID). Proponents of both the state and local deduction and mortgage interest deduction, like NAR, claim these deductions are essential for homeownership.
In reality, this deduction benefits primarily wealthy families, encourages low-income homeowners to purchase homes they otherwise wouldn’t able to afford, and artificially increases housing prices.
Similarly, the state and local deduction is not the driver behind making homeownership affordable — a growing economy, higher wages, and a stable housing market spurred by pro-growth tax reform will do far more than a tax deduction. By eliminating this deduction, not only will the federal government put pressure on high-tax states to stop raising taxes, but its added revenue can help offset the lower rates for individuals and business-key to economic growth.
It’s these broad based reforms — not more deductions for a few — that will drive economic growth and higher wages. By doubling the standard deduction, using the state and local revenue to help pay for tax cuts across the board, and eliminating a whole host of other crony features in the tax code, the administration has taken a strong step forward to put money back in the hands’ of the American people.