Will the Builder Tax Break Go Through?

As the bipartisan tax bill zooms its way to a vote–some estimates have said the decision could come as early as next week–a new focus has fallen on its provisions for homebuilders struggling under the pressure of the housing decline.

Debate on the bill began Thursday–and by day’s end, lawmakers had already killed one of the portions, which would have rewritten bankruptcy laws to allow judges more power to alter mortgage terms.

And that wasn’t exactly a huge surprise: Republicans had previously expressed dissatisfaction about that provision and said they wouldn’t approve it.

But what of the $6 billion in tax breaks being included to help the home building industry? According to today’s Los Angeles Times, it’s now come under fire.

For one, it’s the largest monetary provision in the bill. And the bill is by no means a cheap suggestion: Its cost could eventually exceed $15 billion.

The provision would let builders write off losses this and next year against taxes previously paid in the past four years–an increase from the current allowance of two years.

The National Association of Home Builders encouraged the tax break, according to the Times; but its effect may vary:

  • In the 2006 election cycle, the NAHB
    political action committee ranked third in contributions to
    federal candidates, donating $2.9 million,
    according to the Center for Responsive Politics.
  • Since the 2000
    election, it has contributed $11.3 million to federal
    candidates and parties.
  • However, earlier this year, the NAHB stopped all campaign contributions, saying lawmakers hadn’t "adequately addressed the underlying economic issues that
    would help to stabilize the housing sector and keep the economy moving

Will that affect the builder tax provision? Maybe. But the NAHB is confident it will effect more than just builders.

"Putting stability into the
housing markets helps homeowners retain their equity," Jerry Howard, the
association’s chief executive, told the Times. "Moreover, it will
help stabilize the overall capital markets and therefore the economy.
That helps everyone."

Good point. Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, had another good point–the tax break provision would let builders avoid selling land and homes at hugely discounted prices, which could help the housing market turnaround– and save jobs.

That’s especially pressing, given today’s news that unemployment has risen to its highest level since 2005. A loss of construction jobs helped cause the biggest employment decline in five years, according to the New York Times.

But will the builder tax break make it all the way to the vote? Stay tuned to multi-housingnews.com to find out …