Trump’s Tax Plans: Housing Credits ‘In Play,’ and There’s Buzz Over a Short Extension for Expiring Cuts

As President-elect Donald Trump and his fellow Republicans huddle over what to work into their big tax package next year, one veteran analyst is predicting that housing tax credits will get included.

Separately, some GOP lawmakers reportedly have talked about using the forthcoming package to extend their expiring 2017 tax cuts by four years rather than a longer period like 10 years.

Regarding the credits for housing, these tax breaks would come because elevated home prices will remain a top political issue over the next two years, said Jaret Seiberg, managing director at TD Cowen Washington Research Group, in a note Monday.

“Our view is the GOP will need to address entry-level housing inflation in order to win future elections. This is why tax-credit programs to boost construction are in play,” Seiberg wrote.

The most likely Republican actions are an expansion of an existing tax break known as the low-income-housing tax credit and the creation of a new subsidy called the workforce-housing tax credit, he said. They could get included in next year’s tax package, and both credits aim to cut the cost of funding the construction of new entry-level housing.

The LIHTC program, created in 1986, provides state and local agencies with credits for buying, remodeling and building rental housing for lower-income households. The workforce-housing tax credit, on the other hand, has been billed as extending the LIHTC program to middle-income Americans. It was proposed in a bipartisan measure a year ago.

The home-building sector and related industries would get a boost if the tax breaks for housing get included, Seiberg said.

“The emphasis on entry-level housing should be positive for home builders, especially those that focus on lower-cost properties. Increased construction should benefit building materials, appliance makers and others associated with new housing,” the TD Cowen analyst said.

Meanwhile, a Hill report citing unnamed sources said last week that House Republican lawmakers have floated the idea of a four-year extension of 2017’s tax cuts, so the impact on the federal deficit won’t give some conservatives sticker shock.

But a Politico report on Monday described pushback from House GOP aides, with one saying that no decisions have been made yet about the duration of next year’s tax package, and another offering support for the longest extension possible.

Other Republican lawmakers are dismissing the deficit-related worries raised by watchdogs. GOP Sen. Mike Crapo of Idaho, who is expected to chair the Senate Finance Committee next year, has been getting attention for arguing that extending 2017’s tax cuts shouldn’t be counted as adding to the deficit, as it’s “just extending current law.”