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On Thursday, the Biden administration released a $6.9 trillion budget proposal for next year that would cut deficits by nearly $3 trillion over the next ten years through tax increases.
In the budget, the administration claimed that closing “tax loopholes that overwhelmingly benefit the wealthy and the largest, most profitable corporations,” would save billions of dollars. In that, President Joe Biden proposed to close the so-called “same exchange loophole,” as his administration refers to it, arguing that it “allows real estate investors to defer taxes indefinitely.” But this isn’t the first time Biden has proposed closing the “equal exchange” benefit, and it’s unlikely to be included once Congress approves the spending level.
A “like-for-like exchange,” or 1031 exchange, basically allows real estate investors to sell their property and get another one and defer any capital gains taxes from the first sale. Referring to it as a special tax subsidy, the White House wrote: “This loophole allows real estate investors to defer paying taxes on profits from real estate deals indefinitely while they continue to real estate investment. This amount is an indefinite interest free loan from the government. Real estate is the only asset that gets this sweetheart deal.”
University of Southern California public policy professor and director of the Homelessness Policy Research Institute, Gary Painter, spoke luck Biden is likely trying to show that “people who have rental properties as investments should not be treated differently than people who own their homes,” as the idea of fair taxation, let’s say.
If the rules about how easy it is to transfer from one investment property to another change, you can only see small exchanges because investors don’t want to pay the capital several times, said Painter. Not to mention that the change in the law can make it difficult to obtain financing because the profit is significantly reduced, which changes the value of properties such as multifamily buildings. Painter later added that closing the 1031 exchange “doesn’t seem like the right thing to do right now,” and there are other opportunities for the government to close loopholes that may not affect the construction of multifamily housing.
Senator Elizabeth Warren, on Thursday after the release of the budget, tweeted: “Real estate investors, including giant corporate landlords, buy 1/4 of all single-family homes sold in 2021, always taking advantage of tax breaks. The way I see it, taxpayer money on housing should go to solving the affordability crisis—not improving Wall Street,” agreed the Biden suggested.
The Biden administration claimed that by eliminating the tax subsidy for real estate, it would save $19 billion. What the money will go to, is not mentioned. But, in a separate budget entity, the administration is proposing to invest more than $175 billion in housing—with plans to invest in building and preserving millions of affordable homes, while lowering barriers to housing production; ensuring housing access and affordability for youth aging out of foster care and veterans; investing in first-time, first-generation homebuyers by providing down payment assistance; and funding to build on the Biden Administration’s unprecedented eviction prevention, replacement, and rental housing programs and enhance efforts to end homelessness.
The painter said that if he had to predict, it would not “save” the Republican-led House, which is reportedly considering cutting housing programs in its own budget expected later this spring. according to THE New York Times.
Just thirty minutes after Biden and his administration unveiled next year’s proposed budget, House Speaker Kevin McCarthy Tweet“President Biden just gave his budget to Congress, and it’s completely nonsensical. He’s proposing trillions in new taxes that you and your family will pay directly or through higher spending. Mr. President: Washington has a spending problem, NOT a revenue problem,” which earned a retweet from the House GOP account.
on times’ report, published before the release of Biden’s budget, the publication claimed that some House Republicans were developing their own budget that relied heavily on a budget outline created by Russell Vought (the former Trump administration budget director.)
The budget outline includes a 43% cut to housing programs, which includes the elimination of Section 8, and other proposed cuts, according to Times. Vought told the Times that his strategy uses spending cuts against “wake up and armed government.” But cutting housing programs by a little less than half, and eliminating Section 8 (which uses housing vouchers to financially assist low-income people with their monthly rent), “would be devastating.” ,” Painter said, adding that homelessness and housing insecurity could rise dramatically.
“I have a feeling that in both cases, these are just things that both parties know won’t go away,” Painter said. luck, but it is a way of signaling their commitment to their constituents. In Biden’s case, he showed that real estate investors should be treated the same as people who own their own homes, signaling a commitment to fairness, Painter said. Republicans, if their proposal includes cuts to the housing program, keep their promise to cut “all kinds of social safety net programs.”
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