The elimination of tax expenditures, which includes the tax exemption for housing bonds and the low-income housing tax credit (LIHTC), has been proposed by the co-chairs of the National Commission on Fiscal Responsibility and Reform, better known as the Deficit Commission.
Their draft plan calls for eliminating all $1.1 trillion of tax expenditures. However, it adds that leaders can add back any desired programs and pay for them by increasing tax rates.
The draft addresses tax programs in general and does not specifically name bonds or LIHTCs. Still, affordable housing leaders are taking the threat seriously.
The plan also calls for discretionary spending to roll back to fiscal 2010 levels in fiscal 2012 and a 1 percent cut in discretionary budget authority every year from fiscal 2013 through 2015.
Created by President Obama in February, the commission’s role is advisory. The 18-member committee is supposed to issue a final report by Dec. 1. Fourteen members must agree to a plan for it to move to Congress.
Not all members are on board with the proposal by co-chairs Erskine Bowles, who was chief of staff to President Clinton, and Alan Simpson, former Republican senator from Wyoming.
Illinois Democratic Rep. Jan Schakowsky, a commission member, came out against the draft, saying the “proposal would have serious consequences for lower- and middle-class Americans, and that is why I cannot support it.”
The recent draft proposal needs to be taken in a broader context, said Buzz Roberts, senior vice president for policy at the Local Initiatives Support Corp.
Earlier in the year, the President's Economic Recovery Advisory Board came out with some options for changing the tax system, he said. The board's report included LIHTCs on a list of tax expenditures to be considered for elimination or reduction.
And, just recently Rep. Dave Camp (R-Mich.), the incoming chair of the House Ways and Means Committee, gave a speech in which he called for comprehensive tax reform, including the elimination of corporate tax incentives. However, Camp did not cite LIHTCs or other specific provisions, and many say he has been a program supporter.
"When you take all these things together, you have to be concerned," said Roberts. "It's not a tornado warning but a tornado watch. Conditions could be subject to sudden change."
The LIHTC program has faced challenges before, but this time there are significant differences, said David Gasson, a vice president at Boston Capital and executive director of the Housing Advisory Group, an organization that helps educate lawmakers about housing programs and policies.
“The economic environment is a different world from when we had conversations in the past,” he said. “There is agreement across the board, no matter what party, that something has to be done.”
According to Gasson, the second big difference is all the new faces in Washington. With roughly 100 new members entering Congress after this month’s mid-term elections, an enormous amount of outreach is needed.
The LIHTC industry has a lot of work to do, he said. On a positive note, the industry itself is different than when it faced earlier tax reform efforts and other program challenges.
“We’re very mobilized and, for the most part, a unified industry when it comes to defending our baby,” he said.
Industry leaders are organizing and preparing to make their case for the tax credit, the nation’s main tool for producing affordable housing.
During the recent AHF Live: The 2010 Affordable Housing Developers’ Summit in Chicago, industry members made it clear that educating lawmakers about the program is critical in the months ahead. Developers were strongly urged to invite their representatives to grand openings and other events at their developments. It was also recommended that they cite the many jobs created by their projects when discussing the LIHTC program.