Realtors, small business outraged at tax changes

Opponents weigh in against proposed bill

WA S H I N G T O N • Opposition to sweeping tax legislation introduced Thursday emerged quickly, led by national groups for realtors and small businesses, and sending a signal to Congress that passing the bill could be an uphill battle.

The National Association of Realtors and the National Federation of Independent Business were among the first powerful lobbying groups to issue statements criticizing the bill, a sign of the obstacles congressional leaders and President Donald Trump are facing over their effort to revamp the U.S. tax system for the first time in more than 30 years.

“The National Federation of Independent Business is unable to support the House tax reform plan in its current form,” said Juanita Duggan, the president and chief executive officer of the key group representing small business owners. “This bill leaves too many small businesses behind.”

William Brown, president of the National Association of Realtors, said an early reading of the bill, which would cap the mortgageinterest deduction on new home sales at US$500,000, down from the current ceiling of US$1 million for couples filing jointly, “appears to confirm many of our biggest concerns.”

“Eliminating or nullifying the tax incentives for home ownership puts home values and middle class homeowners at risk,” Brown said in a statement.

The small business owners group, which was enthusiastic as recently as September, soured on the bill after measures were added to limit the businesses that would get relief from a provision that rewrites rules for partnerships, limited liability companies and other socalled pass-throughs. Duggan said the measure leaves too many of its members behind. She said the group would work with House Ways and Means Chairman Kevin Brady, the Texas Republican who’ll manage the bill, “to make the necessary corrections so that the benefits of tax reform extend to all small businesses.”

Currently, businesses organized as pass-throughs move their earnings through to their owners, who are taxed at their individual income rates, which can be as high as 39.6 per cent.

While the bill would reduce the top pass-through rate to 25 per cent, it places limits on the kind of income that would qualify. For example, providers of professional services, including doctors, lawyers, accountants and others, wouldn’t automatically qualify for the lower rate.

The Club for Growth, a conservative free-market group, also said it doesn’t do enough for small businesses and criticized the restoration of the 39.6 per cent tax rate on some taxpayers, though it praised the bill for cutting the corporate tax rate and allowing immediate expensing for businesses.

The U.S. Chamber of Commerce, which had made procedural votes to speed the bill a key metric for rating lawmakers, said “a lot of work remains to be done to get the exact policy mix right and move from a legislative draft to an enacted law.” Still, the business group said the bill is “exactly what our nation needs to get our economy growing faster.”

The National League of Cities also quickly voiced its opposition to the legislation, which includes a US$10,000 limit on deductions for state and local property taxes.

“We see this bill as yet another attempt to limit local control and pass the cost of action in Washington onto city halls throughout the nation,” NLC President Matt Zone, a council member in Cleveland, said in a statement. “Hundreds of local and state governments levy income and sales taxes to pay for community development, schools and public safety under the premise that their residents will not face double taxation from the federal government.”

Americans Against Double Taxation, a coalition of advocacy groups that includes NLC and is dedicated to preserving the state and local tax (SALT) deduction also said it would fight the bill.

The first test of the bill comes Monday, when the House Ways and Means Committee is scheduled to take it up. Among the changes for business and individual tax rates is a measure to cut the corporate tax rate to 20 per cent.

Others came out in favour of the proposed legislation, including JPMorgan Chase & Co.’s Chief Executive Officer Jamie Dimon, speaking as chairman of the Business Roundtable, which represents CEOs of America’s biggest companies. A tech industry group also lauded the move to lower the corporate tax rate and stimulate growth and said it would review the plan.