Transcript Document

NAR Legislative Update
Jamie Gregory
Deputy Chief Lobbyist, Government Affairs
AGENDA
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Key Findings from National Survey
Tax Reform
GSE and FHA Reform
National Flood Insurance Program
Key Findings from a National Survey
Mortgage Interest Deduction
Conducted by:
Bill McInturff, Partner
Nicole McCleskey, Partner
Geoff Garin, President
Jeff Horwitt, Vice President
Key Finding #1
Americans recognize the fragile times we are in. They will be
reluctant to rock the boat as there are glimmers that the
economy may hopefully, finally be showing signs of recovery
with the housing sector leading the way.
At the forefront is a dramatic turn-around in feelings about housing.
Housing Market in the Country
Now thinking about the
housing market in the
country, do you believe
that the housing
market has already
bottomed out and is
starting to improve, is
at the bottom but is not
yet getting any better,
has not yet bottomed
out and will still get
worse?
*Trend data from Bipartisan Policy Center: Frequency Questionnaire, December 10-18, 2011
The deficit is the primary culprit Americans believe is holding
the economy back.
Respondents Top Factors Holding Back Economic Recovery
The federal budget deficit
Budget cuts and lack of funding for programs
Problems with the federal tax system
Rising prices
Problems in the financial markets
Problems in the housing markets
33%
16%
16%
11%
9%
3%
Which of the following do you think is the biggest factor in holding back an economic recovery today…
Key Finding #2
Tax reform strikes a stronger chord with voters when the goal is
deficit reduction or making the tax code simpler and fairer. It
does not mean higher taxes or eliminating tax deductions for
individuals.
Americans across party rally around a simpler and fairer tax code.
% 8-10 Top Goals by Party
Make the tax code simpler and fairer
Reduce the federal budget deficit
Reduce overall tax rates for individuals
Eliminate tax deductions for businesses
Reduce overall tax rates for businesses
Eliminate tax deductions for individuals
Republicans
Independents
Democrats
75%
77%
61%
19%
44%
17%
71%
61%
44%
13%
27%
15%
66%
56%
43%
21%
20%
19%
…Possible goals that Congress might have for comprehensive reform of the federal tax system. For each goal, please indicate how
high a priority you feel this should be. Use a scale from zero to ten, on which a ten means it should be the single most important goal,
and a zero means it should not be an important goal, and five is in the middle. You may use any number from zero to ten.
Key Finding #3
There is still not great familiarity with the Mortgage Interest
Deduction
Not surprisingly, people who do not own a home are less
familiar with the MID.
By Non-Home Owners, Home Owners, Home Owners with Mortgages,
and Itemized Deductions
-24%
+42%
+52%
+48%
And, while talking about buying a home, before this survey how familiar would you say you were with the mortgage interest tax
deduction? Very familiar, somewhat familiar, not too familiar, or not familiar at all?
Key Finding #4
There is a strong opposition to the elimination of MID as a part
of a tax reform effort. We lose a little steam on second home
mortgages, which is a separate, significant challenge.
Americans demonstrate stronger opposition to these reforms.
Proposals by 40% or Higher Strongly Oppose
Strongly
Oppose
Total
Oppose
Completely eliminate the tax deduction for
interest payments made on a home
mortgage.
53% 74%
Place new limits on annual contributions to
retirement savings plans, like 401(k) plans.
Limit income tax deductions on
contributions to non-profit organizations
and charities.
49% 71%
40% 61%
There are a number of proposals in Washington to reform our federal tax system...for each one please tell me if you favor or oppose
that proposal. And would you say that you strongly (favor/oppose) or just somewhat (favor/oppose) that proposal?
Intensity wanes a bit for these measures.
Proposals by 30% or Higher Strongly Oppose
Strongly
Oppose
Reduce the tax deduction for interest
payments made on a home mortgage.
Tax the sale of products sold across state
lines on Internet retail sites like Amazon.
Completely eliminate the tax deduction for
interest payments made on home
mortgages valued above five hundred
thousand dollars.
Total
Oppose
39% 53%
36% 58%
34% 63%
There are a number of proposals in Washington to reform our federal tax system...for each one please tell me if you favor or oppose
that proposal. And would you say that you strongly (favor/oppose) or just somewhat (favor/oppose) that proposal?
Americans find room to limit or raise taxes here.
Strongly
Oppose
Total
Oppose
Total
Favor
For people with higher incomes, place a limit
on their total amount of itemized
deductions, including the home mortgage
interest deduction, charitable deductions,
and deductions for state and local taxes.
22% 43% 54%
Raise taxes on companies for the profits
they earn outside of the United States.
10% 21% 78%
There are a number of proposals in Washington to reform our federal tax system...for each one please tell me if you favor or oppose
that proposal. And would you say that you strongly (favor/oppose) or just somewhat (favor/oppose) that proposal?
Homeowners make a strong coalition against MID changes.
Strongly Oppose by Overall, Home Owners, and Home Owners with Mortgages
Overall
Home Owners
Home Owners
with Mortgages
Completely eliminate the tax deduction for
interest payments made on a home mortgage.
53% 64% 72%
Reduce the tax deduction for interest payments
made on a home mortgage.
39% 47% 52%
Completely eliminate the tax deduction for
interest payments made on a mortgage for a
second home.
29% 33% 35%
Completely eliminate the tax deduction for
interest payments made on home mortgages
valued above five hundred thousand dollars.
34% 38% 41%
There are a number of proposals in Washington to reform our federal tax system...for each one please tell me if you favor or oppose
that proposal. And would you say that you strongly (favor/oppose) or just somewhat (favor/oppose) that proposal?
Respondents from labor union households demonstrate
overwhelming opposition to eliminating the MID.
COMPLETELY ELIMINATE the tax deduction for interest payments made on a home mortgage.
Strongly
Oppose
Total
Oppose
All Respondents
53% 74%
Labor Union Households (10%)
66% 82%
There are a number of proposals in Washington to reform our federal tax system...for each one please tell me if you favor or oppose
that proposal. And would you say that you strongly (favor/oppose) or just somewhat (favor/oppose) that proposal?
Labor union households also exhibit stronger opposition to
reducing the MID.
REDUCE the tax deduction for interest payments made on a home mortgage.
Strongly
Oppose
Total
Oppose
All Respondents
39% 53%
Labor Union Households (10%)
50% 62%
There are a number of proposals in Washington to reform our federal tax system...for each one please tell me if you favor or oppose
that proposal. And would you say that you strongly (favor/oppose) or just somewhat (favor/oppose) that proposal?
Tax Deduction for Interest Payments
Lowered to $500,000 Cap
Completely eliminate the
tax deduction for interest
payments made on home
mortgages valued above
five hundred thousand
dollars.
*Cap the home mortgages
that are eligible for the
yearly mortgage interest
tax deduction at five
hundred thousand dollars,
instead of the current one
million dollars.
Favor
Oppose
35% 63%
66% 28%
*Data from a national survey conducted September 21-22, 2011. N=400 adults
There are a number of proposals in Washington to reform our federal tax system. I would like to read you some of these proposals.
For each one please tell me if you favor or oppose that proposal.
Eliminating the Tax Deduction
for a Second Home
Strong opposition across party is still lower for eliminating the tax
deduction for a second home.
Strongly Oppose Tax Reform Proposals by Party
Republicans
Independents
Democrats
Reduce the tax deduction for interest
payments made on a home mortgage.
47% 35% 30%
Completely eliminate the tax deduction for
interest payments made on a home
mortgage.
66% 53% 50%
Completely eliminate the tax deduction for
interest payments made for home
mortgages valued above $500,000.
50% 35% 29%
Completely eliminate the tax deduction for
interest payments made on a mortgage for a
second home.
34% 25% 27%
Now, having heard some more information about the mortgage interest deduction, I would like to read you some proposals to reform
our federal tax system again. For each one, please tell me if you favor or oppose that proposal.
Strong opposition to eliminate the deduction for second homes is
also lower even among the highest income households.
Strongly Oppose Tax Reform Proposals by Income
Less than $60K
Reduce the tax deduction for interest payments
made on a home mortgage.
Completely eliminate the tax deduction for
interest payments made on a home mortgage.
$60K-$100K
$100K+
24% 41% 56%
40% 60% 81%
Completely eliminate the tax deduction for
interest payments made for home mortgages
valued above $500,000.
32% 37% 47%
Completely eliminate the tax deduction for
interest payments made on a mortgage for a
second home.
29% 26% 32%
Now, having heard some more information about the mortgage interest deduction, I would like to read you some proposals to reform
our federal tax system again. For each one, please tell me if you favor or oppose that proposal.
Key Finding #5
There is strong messaging against changes in the mortgage
interest deduction.
People understand the positive value of home ownership to
economic security.
Top “Bad Idea” Messages to Make Changes to the MID Ranked by Very Convincing
Very Convincing
Total Convincing
American home ownership is a bedrock value of our
culture and people who are able and willing to assume the
responsibilities of owning a home should have the
opportunity to pursue that dream. We need policies that
encourage home ownership so we can create stronger
communities, social stability, and build wealth over the
long term through our homes.
50% 81%
This would be a tax increase on the nation's seventy five
million home owners. A majority of mortgage interest
payments claimed as deductions are filed by people with
incomes under one hundred thousand dollars. Eliminating
the tax deduction will hit the middle class the hardest,
with an average increase of three thousand five hundred
dollars on their federal tax bill.
46% 78%
Please tell me whether each statement is very convincing, somewhat convincing, not too convincing, or not at all convincing argument
to you for why this is a bad idea.
People understand the positive value of home ownership to
economic security.
Top “Bad Idea” Messages to Make Changes to the MID Ranked by Very Convincing
Very Convincing
Total Convincing
Our nation's economic recovery depends on the strength of our
housing sector. For every two homes sold, one job is created good jobs that fuel small businesses in our communities year
after year, like roofers, plumbers, painters, and landscapers.
Every home purchased pumps up to sixty thousand dollars into
the economy over time. Policies that add uncertainty to our
housing sector threaten our economic recovery and the lives of
hard-working Americans.
37% 80%
We need policies that promote home ownership, not jeopardize
it, because our real estate market plays a vital role in our nation's
economy. Housing accounts for more than fifteen percent of our
gross domestic product - that is two trillion dollars a year. And
home sales generate more than two point five million privatesector jobs in an average year.
35% 82%
Please tell me whether each statement is very convincing, somewhat convincing, not too convincing, or not at all convincing argument
to you for why this is a bad idea.
A jobs-based argument for why not to change the MID does especially
well in labor union households.
Our nation's economic recovery
depends on the strength of our
housing sector. For every two
homes sold, one job is created good jobs that fuel small
businesses in our communities
year after year, like roofers,
plumbers, painters, and
landscapers. Every home
purchased pumps up to sixty
thousand dollars into the
economy over time. Policies that
add uncertainty to our housing
sector threaten our economic
recovery and the lives of hardworking Americans.
Very Convincing
Total Convincing
All Respondents
37% 80%
Labor Union
Households (10%)
48% 87%
Please tell me whether each statement is very convincing, somewhat convincing, not too convincing, or not at all convincing argument
to you for why this is a bad idea.
TAX REFORM
Tax Reform
• On June 27th the Senate Finance Committee announced its plan for
tax reform legislation in the Senate using a “blank slate approach”
– A “blank slate” means that as a starting point, all tax expenditures
will be removed from the tax code including MID and capital
gains on primary residence
• Senators have until July 26th to submit in writing to the Finance
Committee any tax expenditures they wish to see kept in the code.
– It is believed that once all submissions are received, the
professional staff of the Finance Committee will begin drafting a
tax reform package.
Tax Reform
• NAR is specifically asking Senators to preserve the following real
estate provisions:
– Mortgage Interest and Real Property Tax Deductions
– Exclusion of capital gain on sale of principal residence
– Exclusion of mortgage debt cancellation
– Depreciation of real estate
– Deferral of gain on like-kind exchanges
GSE & FHA REFORM
GSE & FHA Reform
• House Financial Services Chairman Hensarling (R-TX) introduced
“The Protecting American Taxpayers and Homeowners (PATH) Act”
which includes reforms to FHA, the GSEs, and the financial
regulatory law known as the Dodd-Frank Act
• NAR has a number of concerns with this bill:
– It does not provide for a federal guarantee for a secondary
mortgage market
– It contains significant changes to the FHA program that include
income targeting, downpayment increases, and loan limit
decreases.
• The Bill does include language to fix the definition of fees and points
in the ability to repay/qualified mortgage (QM) regulation
GSE Reform
• Senators Corker (R-TN) and Warner (D-VA) introduced the
“Housing Finance Reform and Taxpayer Protection Act” which
would replace Fannie Mae and Freddie Mac with a new guarantor, the
Federal Mortgage Insurance Corporation
– It would offer reinsurance of mortgage securities if private
creditors ever reached another crisis in the future
– This retention of the federal guarantee for mortgage securities is
critical to REALTORS®.
NATIONAL FLOOD
INSURANCE PROGRAM
Several Reasons for the Increase
• Flood map improvements reveal homes in the floodplain
• Lender requires private insurance above NFIP’s limit (250K)
• Property does not have an Elevation Certificate to provide
accurate information on the flood risk
• Misleading news reports of the worst-case insurance rates if
Sandy-rebuilding communities don’t elevate their homes.
• 2012 Biggert-Waters Law phases-out some rate subsidies
2012 Biggert-Waters Law
• Situation:
– For years NFIP operated month to month shutting down
several times and stalling +1,300 home sales daily
– No private market alternative for flood insurance
Figure 1
Average Private Flood Premium is More Than
Twice as Much as NFIP Premium
$
1,400
1,200
1,000
TOTAL
Premium Taxes
Fed./Foreign Income Taxes
$1,297
Cost of Capital & Profit
$236
Subsidy
$361
NFIP Average Premium
(excl. premium tax)
$585
800
$83
$32
600
400
$585
200
0
NFIP Average Premium
(excl. premium tax)
Private Policy Premium
Source: PCI, based on NFIP Actuarial Rate Review and other sources
– Political Choice: Subsidies or Extension
2012 Biggert-Waters Law (Cont.)
• The Best Deal in a Bad Situation:
– No shutdowns for 5 years
– Below private-market pricing
– Gradual phase-out for existing subsidies
– More accurate maps & streamlined appeals
– FEMA report on affordability
NAR Policy: Maintain NFIP coverage for 2nd homes
Next Steps: NAR Educational Efforts
• Enhanced content on Realtor.org Flood Page
• NAR Legal developed info and guidance for members
on how to address disclosure concerns and possibility of
increased flood insurance premiums
• Continue to brief numerous state associations and local
boards
• Conducting survey on NFIP rate increases with state
associations; please ask your members to it fill out
• Held multiple webinars with FEMA officials
Next Steps: NAR Actions on the Hill
• Working to delay several Biggert-Waters rate provisions
until FEMA reports to Congress on rate affordability
– House already passed an amendment to delay one of
the provisions (“grandfathering”) for 1 year
– Successful attached that amendment to the Senate
bill when it comes up for a vote
– Also working to lengthen and expand the delay to
include the other rate provisions (no more subsidies
for home purchases after Oct. 1)
What We Need
• Ground truth the cause of any rate issues
– Please have clients talk to an insurance agent, don’t rely
on blogs or media rumors
– Get specifics & any calculations in writing so we can
investigate; have them fill out our survey
– Get Elevation Certificates, Go through appeals process
• Need to build case for rate relief
– Congress won’t fix unless proven broken
– Don’t want Congress to pass something that doesn’t fix
Questions?
www.realtor.org/topics/national-flood-insurance-program-nfip