Publication: Progressive Review
Housing Bill Brings Big Tax Breaks | |
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THE PROGRESSIVE REVIEW - April 17, 2008
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Big Tax Breaks for Businesses in Housing Bill
By Stephen Labaton and David M. Herszenhorn
The New York Times
Washington - The Senate proclaimed a fierce bipartisan
resolve two weeks ago to help American homeowners in
danger of foreclosure. But while a bill that senators
approved last week would take modest steps toward that
goal, it would also provide billions of dollars in tax
breaks - for automakers, airlines, alternative energy
producers and other struggling industries, as well as
home builders.
The tax provisions of the Foreclosure Prevention Act,
which consumer groups and labor leaders say amount to
government handouts to big business, show how the credit
crisis, while rattling the housing and financial markets,
has created beneficiaries in the power corridors of
Washington.
It also shows how legislation with a populist imperative
offers a chance for lobbyists to press their clients'
interests.
This has proved especially true on the housing legislation,
which many lawmakers and lobbyists view as one of the last
opportunities before Congress grinds to a halt amid
election-year politics.
In the Senate bill, the nation's biggest home builders,
some now on the verge of bankruptcy, won a provision that
would let them claim millions in tax refunds by charging
their current losses against the huge profits they made
three or four years ago. Other struggling industries would
benefit from this provision.
"This is our biggest legislative effort since the Tax
Reform Act of 1986," said Jerry M. Howard, chief executive
of the National Association of Home Builders. Hundreds of
the association's members flooded the district offices of
representatives and senators while they were home for the
spring recess last month.
Supporters of the bill, including Senator Max Baucus,
Democrat of Montana and the chairman of the Senate Finance
Committee, say it represents sound tax policy carefully
focused to help stimulate the lagging economy. But the
White House opposes the Senate bill, and Democratic leaders
in the House not only have promised to provide more relief
for individual homeowners, but have also dropped the
corporate tax provisions from their version.
Downtrodden automakers - Ford and General Motors - were
especially dogged in securing a tax break that would let
them collect alternative minimum tax credits, also known
as the A.M.T., that would otherwise be out of reach because
they did not pay enough taxes in recent years to claim a
rebate.
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If the provision becomes law, it could mean checks up to
$40 million for the car manufacturers, as long as the
companies had made investments in plant or equipment in
that amount.
A Ford spokesman, Mike Moran, said he was aware that Ford
would benefit from the tax credit in the bill passed by
the Senate. But Mr. Moran said that the credit applied to
a range of industries, not just automakers. A General
Motors spokesman could not be reached.
Domestic airlines and manufacturers other than automakers
would be eligible to claim the A.M.T. break as well. One
lobbyist said that the companies that had sought the tax
breaks in meetings with lawmakers included Ford, General
Motors, American Airlines, Northwest Airlines and Goodyear
Tire and Rubber.
Companies could claim only one of the new tax breaks, which
in all, are expected to cost $6 billion through 2018. The
jockeying among industry groups, including Realtors, home
builders and bankers, is certain to intensify in coming
weeks as lawmakers move to reconcile the Senate bill with
a more ambitious package of housing legislation now under
way in the House.
Lawmakers on the tax-writing House Ways and Means Committee
have omitted the corporate tax cuts from their version of
the bill in favor of tax breaks for first-time home buyers
and developers of low-income rental housing, and more aid
for owners facing foreclosure.
Congressional Democrats are also hearing from consumer
advocates and other groups who say that the Senate bill
does little to help Americans in danger of losing their
homes to foreclosure.
"The Senate legislation gave corporations and Wall Street
billions in tax breaks," Terence M. O'Sullivan, the
president of the Laborers International Union of North
America, said at a news conference on Tuesday to denounce
the bill.
"Tax breaks for corporate home builders won't help
stabilize the housing market, won't create jobs and won't
prevent a single foreclosure," he continued. "If anything,
this multibillion-dollar windfall will make things worse."
Even Senator Christopher J. Dodd, Democrat of Connecticut
and the main author of the Senate bill, said the measure
did not live up to its name and that he wanted changes.
But other lawmakers, and the lobbyists who seek to
influence them, also recognize a golden opportunity when
they sense that the political winds virtually guarantee
a bill's passage, and the housing crisis is just such a
time.
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In a sign of how such legislation allows lawmakers to
advance many other goals, the Senate bill also includes
tax provisions to encourage alternative energy production
at a cost of roughly $6 billion over 10 years.
That provision was sponsored by Senator Maria Cantwell,
Democrat of Washington, and Senator John Ensign, Republican
of Nevada. A similar measure was dropped from a major
energy bill last year and again from the economic stimulus
bill in February.
But without quick action to extend expiring tax incentives,
Ms. Cantwell said, many companies would simply drop
projects. The housing bill was the easiest and fastest way
to get things moving.
Other industries facing financial difficulties, like
retailers, may realize that the tax provisions in the
bill offer help for them, too.
Over the next few weeks, industry groups that fought to
secure tax provisions in the Senate bill are expected to
argue that providing help for important industries offers
the best chance of helping to reverse the economic downturn.
To press their case on Capitol Hill, 15 of the biggest
residential construction companies, including KB Homes
and Toll Brothers, formed a coalition and hired a lobbying
firm, the C2 Group, apart from the larger National
Association of Home Builders.
Tom Crawford, a founder of the C2 Group, met with staff
members of the Senate Finance Committee, several of whose
members had already begun expressing concern about the
effect of the slowing economy on home builders and other
businesses.
The home builders were hardly the only industry that
lawmakers heard from as the Senate housing legislation
took shape and it became clear that the bill would provide
more in the way of tax breaks aimed at stimulating the
economy than direct assistance for distressed homeowners.
The cause of the automobile manufacturers was taken up by
Senator George Voinovich, Republican of Ohio, and Senator
Debbie Stabenow, Democrat of Michigan, who pushed to allow
them access to up to $40 million each in alternative
minimum tax credits.
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Automakers and other companies that have lost money in
recent years have accumulated billions of dollars in such
credits, which are based on cumulative payments of the
corporate alternative minimum tax. Companies, however,
can claim a refund of such credits only in years when
they pay regular corporate income taxes in amounts that
exceed what they would owe under the alternative tax
method.
The provision benefiting home builders and other struggling
businesses would allow operating losses to be carried back
over four years rather than the two years in current law.
It is a strategy that Congress has used as a way of
stimulating the economy in previous recessions, most
recently in 2002 with the support of the Bush
administration.
But the White House opposed the idea when members of
Congress proposed it as part of the economic stimulus
package earlier this year. And some House Democrats
suggest that home builders and their lobbyists will
face an uphill battle in trying to keep the provision
when the Senate bill is reconciled with a rival tax
package that was approved last week by the House Ways
and Means Committee.
These Democrats said that the Ways and Means chairman,
Representative Charles B. Rangel, Democrat of New York,
and other leaders, including Nancy Pelosi, the House
speaker, would oppose the provision as benefiting
builders at a time when Congress should be helping
homeowners.
"This ship largely sailed when Congressional Republicans
left it out of the stimulus package," said one House
Democratic aide, who spoke on condition of anonymity so
as not to interfere with negotiations.
Unlike the Senate bill, which includes a tax credit of up
to $7,500 for purchasers of foreclosed properties, Mr.
Rangel's bill provides a credit for all first-time home
buyers - a move that drew strong support from the National
Association of Realtors.
"This is a meaningful incentive that should draw into the
market many purchasers who, to date, have remained on the
sidelines," the president of the group, Richard F. Gaylord,
wrote. "We believe this credit can convert 'lookers' into
first-time home buyers."
Other industry groups were also eager to sign on as
supporters of Mr. Rangel's bill, even as many of them
hope to push him to endorse a more expansive menu of tax
breaks that will benefit them.
Among them were the National Association of Home Builders,
the Mortgage Bankers Association, the Securities Industry
and Financial Markets Association, the Council of Federal
Home Loan Banks and the American Hospital Association.
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Micheline Maynard contributed reporting from Detroit.
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