Mr. Speaker, I recognize myself for 2\1/2\ minutes. It is not often I find myself disagreeing with my esteemed friend, the ranking member of the Ways and Means Committee, but I would like to briefly address his concerns. As our esteemed…
Mr. Speaker, I recognize myself for 2\1/2\ minutes.
It is not often I find myself disagreeing with my esteemed friend, the ranking member of the Ways and Means Committee, but I would like to briefly address his concerns.
As our esteemed chairman, Mr. Rangel, pointed out, this is a serious program that all agree needs a serious solution to avoid having people who lose their homes end up having their loss become a taxable event. Our legislation solves this.
Where I take modest exception to the ranking member and, in fact, had a rather spirited debate before the Rules Committee with Ranking Member Dreier that this is somehow a temporary problem and just requires a temporary solution, we are in a situation now where the majority would argue that there is never a good time to have people who lose their homes have that loss be a taxable event. Second, unlike the Bush administration thinks this is going to be solved in the next year or two, the fact is, in 2006, 20 percent of the first-lien mortgages were in the subprime market.
We are going to see exploding adjustable rate mortgages for years. Those people shouldn't have uncertainty if there are people who assume control who think that their loss should be a taxable event.
As it speaks to the pay-for, the Democrats have made a commitment that we are going to pay for our actions. We are not going to add to the deficit. This is an entirely appropriate pay-for. There was never an intent with the $500,000 per couple exclusion from capital gains on the sale of their homes to string these together.
I came to Congress committed to enacting that relief to protect them. But under the provisions that, as it has worked out, some extraordinarily wealthy people can string these together and have a $500,000 tax-free gain three times in 6 years.
Our amendment, our pay-for, gives everybody the protection for their principal home and allows them to get the capital gains exclusion to the extent that a second home is their principal home. It's reasonable, it's balanced, it's paid for. I urge its adoption.
Mr. Speaker, I reserve the balance of my time.
Mr. Speaker, I yield 2 minutes to the distinguished Chair of the Trade Subcommittee, and a senior member of the Ways and Means Committee, Mr. Levin.
(Mr. LEVIN asked and was given permission to revise and extend his remarks.)
Mr. Speaker, I yield 2 minutes to the distinguished Chair of the Select Revenue Measures Committee and a champion of tax fairness, Mr. Neal from Massachusetts.
(Mr. NEAL of Massachusetts asked and was given permission to revise and extend his remarks.)
Mr. Speaker, I yield myself 15 seconds to clarify that there's no luxury tax on second or third homes. It preserves the tax exemption for the $500,000 capital gain on a residence, and it permits people to claim an additional benefit to the extent to which it is their primary residence in the future.
I would at this point, Mr. Speaker, recognize a distinguished member of the Ways and Means Committee, Mrs. Tubbs Jones from Ohio, whose experience helped shape this legislation, for 2 minutes.
(Mrs. JONES of Ohio asked and was given permission to revise and extend her remarks.)
Mr. Speaker, I yield 2 minutes to the distinguished Ways and Means Committee member, Mr. Pascrell from New Jersey, a former mayor who has firsthand experience about the significance of this legislation.
Mr. Speaker, I yield 2\1/4\ minutes to the distinguished Ways and Means member from Nevada (Ms. Berkley), who has represented an area that is facing this problem and has been so generous in sharing with us the consequences.
Mr. Speaker, it is my honor to yield 2 minutes to the distinguished gentleman from New Jersey (Mr. Andrews), who has been acknowledged as one of the prime drivers in shaping this legislation.
(Mr. ANDREWS asked and was given permission to revise and extend his remarks.)
Mr. Speaker, I yield 1 minute to the distinguished gentleman from Rhode Island (Mr. Langevin).
(Mr. LANGEVIN asked and was given permission to revise and extend his remarks.)
Mr. Speaker, I yield 1 minute to the gentleman from Ohio (Mr. Space).
Mr. Speaker, I yield 1 minute to the distinguished gentleman from Indiana (Mr. Donnelly).
Mr. Speaker, I yield 1 minute to the gentlewoman from Arizona (Ms. Giffords).
Mr. Speaker, I would recognize the gentleman from California (Mr. McNerney) for 1 minute.
Mr. Speaker, I yield myself such time as I may consume.
I would like to commend my colleague for the work that he has done on this measure, Mr. McCrery, and our leadership because at core there is bipartisan understanding and support for the elimination of what has been referred to as a phantom and unfair tax on the poor souls who lose their homes and who receive no net increase to them.
Where we have modest disagreement is in two specific areas: one, the bill that is before us recognizes that there is never a good time to tax American homeowners on this phantom benefit of having their loan forgiven on a foreclosed property. There no circumstances under which we could conceive that we wanted to penalize them for something that they didn't receive, so we made it permanent. Unlike the minority, unlike the Bush administration, we don't think there is ever a good reason to tax them on something that they don't receive.
Second, we're paying for the cost that is associated with it because, sadly, even a tax provision that makes no sense carries value, and under our rules, we need to pay for it. And what we did was not to implement any additional tax, but to clarify the benefit that is given to owners of principal residences that they have a $500,000 tax-free gain if they occupy that as their principal residence for 2 out of 5 years. That's something that we broadly agree upon.
Now, we've always agreed that that ought to occur to the homeowner. Now we're hearing that somehow our friends on the other side of the aisle think that an additional tax benefit, so that people could string this together over the course of 6 years and get $500,000 three times as a tax benefit, is somehow, some way a tax increase. It is not. The purpose of that tax provision was never to reward people who could game the system and string together tax increases two or three times over a relatively short period of time.
So we have clarified it: as long as it is their principal home, their principal residence, they can claim the exclusion. And to the extent that a second home, after they've gotten $500,000 tax free, the extent to which they occupy a second home for an additional period of time, they can claim the proportion that it is actually their principal residence. I would dare say that was the intent for the majority people of why that provision was implemented in the first place. It's reasonable, it's sound, and I would strongly suggest that that's why people in this industry, Realtors, mortgage bankers, homebuilders, support the bill that we brought forward.
I suggest that this bill is something that all of us ought to support. I strongly urge its passage.
Mr. Speaker, it is estimated that, before this housing slump is over, 2 million homeowners will lose their homes due to skyrocketing interest rates on their mortgages.
Increased foreclosures have adverse effects on the values of neighboring properties. For example, research indicates that, for each foreclosed home in a given neighborhood, the prices of nearby homes could fall by 1 percent to 1.5 percent.
Nationally, housing prices have stopped rising. In fact, some measures of home prices have already declined, by more than 3 percent since the beginning of 2007. Some economists predict that real housing prices are likely to decline by more than 15 percent over the next 2 years.
We want to prevent thousands of Americans from getting hit by the double whammy of (1) losing their homes to foreclosure, and (2) getting slapped with a tax bill when the debt on their home is discharged by the lender.
Even taxpayers that restructure their mortgages to avert foreclosure face this risk of triggering large tax bills.
It doesn't seem right for individuals in this circumstance to face a tax bill when they really have no increase in their net worth.
As I see it, their house went down in value, and the individuals couldn't meet their mortgage requirements, resulting in foreclosure. The amount of the income that they would recognize without regard to this bill would be equal to or less than the decline in value of their home. So, absent this legislation, homeowners in this situation would be slapped with a tax liability for no net increase in wealth.
H.R. 3648 would correct that result so that if a person's principal residence lost value, that loss won't give rise to a tax liability.
Mr. Speaker, I yield back the balance of my time.
Mr. Speaker, I rise to oppose the motion to recommit.
First of all, as the gentleman mentions, using the term ``promptly'' means that it is kicked back to the committee to an uncertain future.
This has been before the committee for some time. There is broad bipartisan support that we need to solve this problem. And I have listened to my friends, they haven't come forward with any reasonable suggestion about an alternative pay-for. They had an opportunity in the Rules Committee; they had an opportunity before the committee. If we follow their course, we're going to be in limbo, I don't know how long, but unnecessarily.
The minority has been interested in the past in making it temporary. That was the Bush administration's position; that's what Republicans argued before the Rules Committee. We don't want to put it back to an uncertain future.
The one proposal that has come forward today for a pay-for was itself a long-term revenue loser. Using a Roth-style approach to government employee accounts, I think they're 457s, is a long-term revenue drain which uses an accounting gimmick in the short term to have people pay a little tax so they save a whole lot of tax in the future. That will add to the deficit over time.
Now, contrary to what my distinguished friend from Virginia says, it does not disadvantage people. The exclusion for residential property for a prime residence was just that, it was to give people a $500,000 exclusion from capital gain on the sale of the property. It doesn't foreclose other people from stringing it forward to get more than $500,000. It just means the extent to which it's not your primary residence, you don't get a percentage increase above that. If it's your primary residence for one-third of that time, you get one-third of the benefit, in addition to $500,000 that you get with your first bite of the apple. It means you don't get two it means you don't get three in 6 years; you get one full bite, and then you get a percentage on top of that. It's reasonable; it's fiscally responsible.
I strongly urge the rejection of this proposal that puts this legislation in limbo. There is broad bipartisan support for the concept. The permanent support of a permanent nature of it is sound, the pay-for is reasonable. I urge rejection of the motion to recommit.
Mr. Speaker, I yield back the balance of my time.