Ryan loses key ally on tax reform after switch on breaks for homeowners

The National Association of Home Builders on Saturday accused House Speaker Paul Ryan of abruptly reversing course on a mortgage tax credit proposal and announced it would oppose the tax-reform proposal that GOP lawmakers expect to unveil on Wednesday.

The about-face by the housing-industry lobbying group strips Republicans of a powerful ally. Tax breaks for homeowners have long been one of the flash points of any attempt to rewrite the nation's tax laws.


"All the resources we were going to put into supporting are now going to go into opposing the plan," NAHB Chief Executive Officer Jerry Howard told POLITICO.

Homebuilders and other groups had been working with Ways and Means Chairman Kevin Brady (R-Texas) on a plan to preserve tax breaks for homeowners. House Republicans have been planning to weaken the deduction that home mortgage borrowers currently get for the interest they pay on their mortgages by raising the standard deduction, leading much of the housing lobby to line up against the plan.

As an alternative, Brady had agreed to a tax credit that would combine mortgage interest and local property taxes, Howard said.

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Friday night, Brady told Howard that that idea had been rejected by House leadership. In a phone call Saturday, Ryan said rank-and-file members weren't comfortable with the concept of a homeownership tax credit, Howard said.

"I don’t think it's fair of the speaker to take a concept that his own committee chair is in favor of and deep-six it without vetting it with the conference," Howard said.

"He told me there wasn’t enough time and the concept would not be put into the document," Howard said. "I told the speaker candidly we had shopped the proposal to the White House and we had support there."

A Ryan spokeswoman confirmed the call had taken place but had no other comment.

Brady said in a statement that tax writers will restore an itemized property tax deduction to the plan and suggested that the fight over the mortgage tax break wasn't over.

"Homebuilders have been great partners in developing a new home credit that helps more Americans with both their mortgage and property taxes by expanding this tax relief to homeowners who don’t itemize," Brady said. "I hope members of Congress will examine it closely to determine if they want it included before tax reform heads to the president’s desk."

A person familiar with the tax discussions said rank-and-file House members aren't well-versed on the concept of a mortgage and property tax credit. The idea also wasn't consistent with the original GOP framework, this person said.

The framework called for preservation of "tax incentives for home mortgage interest" but didn't explicitly endorse the mortgage-interest deduction.

The mortgage-interest deduction has been widely criticized by economists and housing advocates because most of its benefits flow to wealthier Americans. A tax credit, by contrast, reach more low- and moderate-income buyers, especially under the GOP framework, which increases the standard deduction.

"Under the framework, the mortgage-interest deduction becomes simply a subsidy for the very wealthy," Howard said. "It doesn’t do anything to promote homeownership."

Colin Wilhelm contributed to this report.



CORRECTION: An earlier version of this report misattributed a quote about an itemized property tax deduction. The quote is from House Ways and Means Chairman Kevin Brady.