The Lack of Support is Taxing

Well, the people have spoken and given George W. Bush a second term in the White House. Housing advocates should prepare for more of the same, only worse. What lessons can we draw from our experience with federal housing policy from the first Bush Administration? The words are soaring, but the works do not match up.

For all the talk about increasing homeownership, what has the Bush administration actually done? The President said there would be 5.5 million new minority homeowners by the end of the decade, but has made limited proposals toward that goal.

The American Dream Down Payment Program, first introduced in 2001, was finally enacted in 2003 with an authorized level of $200 million a year. But appropriations for the first year were only $87 million and will be less than that when the appropriations process comes to a close for this year: At an average grant of $5,000, that’s 17,400 new homeowners a year. The Zero Down Payment proposal was rolled out in early 2004 and was not taken up by Congress. It was only envisioned to serve 150,000 families a year anyway. Much has been made of support for a Home Ownership Tax Credit. But while there are bills in both the House and Senate with lots of bipartisan support, the bills have stalled. At the President’s initiative, Congress passed no fewer than four tax bills in the first Bush term, but none contained this tax provision. Given that President Bush has spent no political currency on the Home Ownership Tax Credit, the depth of his support for this idea is questionable.

In 2001, the Bush Administration declared the goal of ending “chronic” homelessness in 10 years, but has proposed precious little new resources to that end. This year’s Samaritan Initiative, which would direct $70 million more to supportive housing and services, has not passed. But that’s the least of the problems. The wholesale attack on the housing voucher program by the Bush Administration that started in 2003 and accelerated in 2004 renders the rhetoric on ending homelessness empty indeed. If Congress had agreed to the Flexible Voucher Program as proposed by HUD in 2004 with a $1.6 billion cut in voucher spending, voucher administrators would have been left with the flexibility to choose to serve fewer extremely low-income families, charge higher rents to already poor households or worse. What HUD wanted Congress to do and what HUD subsequently did, in part through regulation, created the conditions in which more people would become homeless. The exploitation of the language of ending homelessness and the shameless promotion of this fiction by the administration’s Interagency Council on the Homeless are hypocrisy that takes your breath away.

The most serious threat to federal housing programs is the same that all non-security domestic discretionary spending faces – tax cuts. George W. Bush has convinced Congress to enact tax cuts that have turned the $308 billion federal surplus we had when he took office in 2001 into a $413 billion deficit when the FY2004 books closed. President Bush has made clear that he expects Congress to make all the tax cuts permanent, which will cost another $1 trillion. The tax cuts are intended to constrain federal spending. Sooner than later the level of deficits will become unsustainable and spending will have to be slashed.

Of course, it is the domestic discretionary programs like housing, education, environmental protection, transportation, childcare or nutrition that will be targeted first. Indeed, the Flexible Voucher Program in the FY2005 budget was simply a spending cut dressed up as program reform. But even if all of HUD was wiped out tomorrow, it would barely dent the deficit. It is in the entitlements such as Social Security, Medicare and Medicaid where the big money is to be found.

President Bush also wants to make the tax code simpler, including closing loopholes and eliminating some deductions and credits. The National Association of Home Builders has extracted a promise from the president that the mortgage interest tax deduction will not be affected. The charitable contributions deduction is also off the table. There is no such protection yet for the Low Income Housing Tax Credit (LIHTC). Given the close call on the LIHTC in 2003, when the dividend exclusion was almost passed, we should not expect the president to care much about what happens to the LIHTC this year.

The president also has stated that tax reform will be revenue neutral, meaning he does not want to raise or lower overall taxes in the process. But there is no promise that the tax burden will not be shifted from one group of taxpayers to another. If simplifying means a flat tax or a consumption tax, as many have suggested, the federal tax system will become more regressive, placing a disproportionate burden on people who have low incomes.

The fact that the majority party gained seats in both the House and the Senate would seem to give President Bush more support for his proposals in the Congress. However, members of Congress still have to pay attention to their constituents. Congress protected the housing voucher program this year precisely because they heard from their constituents about the impact the cuts would have on the communities they represent. Already, the public is indicating they want deficit reduction more than they want tax cuts.

Federal tax policy is where the major action will be in the next two years. Those who want to protect and increase the federal commitment to safe, decent and affordable housing for all Americans cannot be absent from the tax debate.

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