President Trump promised that an overhaul of the tax code would make it simpler for everyone to file their taxes and that it would mostly benefit the middle class.
But critics say the Republican tax plan that's moved through the House and seems poised to pass the Senate is far from friendly to working and middle class Americans. And that's especially true when it comes to housing and homeownership in high-end real estate markets like New York City.
Properties in some of the Rochester region's suburbs and in the Finger Lakes could also be adversely impacted by the Republican tax plan, says James Yockel, CEO of the Greater Rochester Association of Realtors.
"It's a little narrow-minded to say that what happens in New York City won't affect us," says Yockel. "We're generally in favor of tax reform, but if you lose some of the incentives, it will make it harder for many people to get into a home of their own."
A study by PricewaterhouseCoopers paints a much grimmer picture. The study warns that if the Republican tax plan passes in its current form housing prices would fall about 10 percent nationwide.
The GOP plan targets the deduction for interest on mortgage debt, which is a huge benefit when it comes to buying a home. Right now, a home buyer can deduct the interest payments on mortgages up to $1 million, but Republicans propose dropping that ceiling to $500,000.
This may seem like it's of little consequence to most Americans, since the median price of a home in the US is hovering at about $250,000. It's even lower in the Rochester region: approximately $83,000. But the figure isn't a thorough gauge of housing prices or affordability, particularly in the major metros. For instance, it would be a challenge to find a starter home for $250,000 in areas like New York City, Boston, or almost anywhere in California.
While critics' claims that the Republican tax plan would turn the US into a nation of renters may be exaggerated, many economists warn that the plan poses other problems for the middle class. They note that the country is still recovering from one of the worst recessions in US history, for instance. And when the housing market slumps, sales of nearly every product and service homeowners need from carpeting to washers and dryers slump with it.
And many middle class Americans had to delay retirement because they lost the equity in their homes. A proposed change to the capital gains provision could worsen the problem for some retirees. The government allows homeowners to exclude up to $250,000 from their taxable income ($500,000 for married taxpayers) from a sale of their primary residence, according to a recent Forbes article. Currently, home owners need to live in the home for two of the last five years, but the Republican plan pushes it to five out of the last eight years.