House Republican leaders prepare to speak on Nov. 7 about a proposed overhaul of the tax code. (Melina Mara/The Washington Post)
The tax package proposed by House Republicans could lead to a collapse of funding for affordable housing and spike taxes for some middle-class families in the nation’s capital, D.C. officials said Monday.
At a news conference outside the U.S. Capitol, D.C. Mayor Muriel E. Bowser (D) and Del. Eleanor Holmes Norton (D) said the proposal to eliminate the deduction for state and local income and property taxes could lead to sharp hikes in the overall tax bill for some District families. The increase could be more than 10 percent in some parts of the city.
The plan also could cripple efforts to create and preserve affordable housing, in the District and cities throughout the country, by eliminating a key provision of the tax code that encourages private developers to build low-income housing, they said.
Bowser and Norton said the House bill's effects are particularly jarring in the District, which already has the highest per capita federal tax rate in the nation despite lacking voting representatives in Congress.
“We have more than paid our share,” Norton said.
Emily Schillinger, a spokeswoman for the House Ways and Means Committee, noted that the House bill preserves the mortgage and charitable deductions and a portion of the local property tax deduction.
She said the bill “will help people keep more of what they earn regardless of where they live, including in high-tax states.”
Congressional Republicans are working to hammer into shape their respective versions of a tax bill. The Senate Finance Committee met Monday to begin marking up its bill, and the House is expected to vote on its plan later this week.
Both the House and Senate plans would cut the corporate tax rate to 20 percent from 35 percent, although the Senate bill would delay that cut by a year. A number of the bills' shared elements — such as eliminating the alternative minimum tax and doubling the limit at which the estate tax kicks in — benefit the wealthy, but supporters say the bills would also bring wide tax cuts to the middle class.
But such reductions could be offset by the plans’ proposals to do away with or cap the deduction for state income tax and local property tax payments. The House bill preserves a deduction for local property taxes up to $10,000.
Changes to the deduction would be felt especially in areas with a high local tax burden and high property values, such as the District and its surrounding suburbs.
In parts of Northwest Washington, the average annual tax bill of a four-person household with an income between $100,000 and $200,000 could rise under the House bill by roughly 17 percent, or more than $2,500, according to an analysis by Americans Against Double Taxation, a coalition of government associations that includes the National Governors Association, National Association of Counties and National League of Cities.
In less affluent areas of the District, the average tax bill for the same family could still increase but by a less dramatic margin. In parts of Southeast Washington, the tax hike would be about 3 percent, or $437, according to the group’s figures.
“We want the Congress to go back to the drawing board on this bill,” Bowser said, “to be deliberate, to be fair and to make sure middle-class families are not paying for tax cuts for the super rich.”
A separate analysis released by the Institute on Taxation and Economic Policy found that District-wide, about 39 percent of households earning between $77,220 and $131,900 would see their taxes increase next year under the House plan.
While many critics of the bill have focused on the state and local tax deduction, officials in the District and other cities say it could also have far-reaching effects through the elimination of financing mechanisms used to spur urban development and low-income housing.
Private activity bonds are one such mechanism; they attract private-sector funding to affordable-housing projects by making lower interest rates available to developers. Todd A. Lee, executive director of the D.C. Housing Finance Agency, called such bonds “our primary tool” for financing affordable housing.
Lee said roughly 9,000 units of affordable housing have been built with the help of such bonds since 2010.
The Senate version of the bill would retain private activity bonds.