The Hon. Jerry Weller
U.S. Congress
(R-11th District, Illinois)
Addressing the Council for Affordable and Rural Housing:
I appreciate very much the opportunity to address the Council for Affordable and Rural Housing.
I’m looking for ways to make housing more affordable for all Americans. I represent a very, very diverse District in Illinois. I am the only Republican representing residents of the city of Chicago; I represent the south suburbs in Cook and Will Counties; I represent bedroom communities as well as rural and farm communities, and a lot of cornfields, too. This gives you a flavor for the District I represent.
Even though it is very, very diverse, there are a lot of economic concerns that are shared — whether you live in the city, suburbs or the country. One clear message that came out of the 1996 election, which was a historical election from the standpoint that never before had a Democratic incumbent President been re-elected with a Republican majority in both Houses of the Congress, which was something that had never occurred before, but also told those of us that had the privilege of being elected, that number one is, that by providing divided government, the taxpayers (those who work hard and play by the rules, and of course, pay the bills) want to hold us accountable in a divided government; but, they also want us to work together to solve the challenges that we face.
Make Washington ResponsiveThat is one clear message; because it is clear that the taxpayers wanted those of us in Congress and the President to work together (Republicans and Democrats) to solve the challenges that we face. That is really consistent with what a lot of us have been trying to do over the last three years in our new majority. That is, to change how Washington works; to make Washington responsive and more accountable to the folks back home.
I think we have made some real progress because of the commitment that we have made to changing how Washington works — holding their feet to the fire. We have had some real victories. If you think about it, just in the last year — the first balanced Budget in 28 years, not since Neil Armstrong walked on the moon in 1969 has Washington balanced its books, just like you do in your businesses. The first Middle Class tax cut in 16 years, providing real tax relief for Middle Class families. The first meaningful Welfare Reform, emphasizing work and family responsibility, a Reform that produced a 25% reduction in our nation’s Welfare rolls. For people like my mom and dad, the Seniors, we preserved Medicare and extended its life for another ten years.
Those are big victories, and those are victories that were achieved because folks back home told us we needed to work together to solve our challenges, to come up with real solutions, that we had to make progress.
Big Victory In Tax Cuts
Probably the biggest winner with that progress has been the Middle Class, folks that work hard, play by the rules, and of course pay the bills. The Budget agreement alone will save America’s taxpayers over $1 Trillion; money that otherwise would have gone to Washington, money that will stay home in local communities. That is a big victory.
But, clearly I believe the biggest victory being enjoyed by the Middle Class in the last year is the tax cuts. Time and time again, the New York Times and the Washington Post said you can’t balance the Budget and cut taxes for working families at the same time. We succeeded in doing that and proved them wrong. We balanced the Budget for the first time in 28 years while providing real tax relief to the Middle Class families, and for the creation of new jobs.
Keeping Dollars at Home
Basically, that is because we have a philosophy that you can spend your hard-earned dollars better at home in your home communities than we can in Washington. That was a big victory for that philosophy. The child tax credit alone in my state of Illinois will allow Middle Class families with a total of three million children who are eligible to keep almost $1.5 Billion dollars in higher take-home pay that will stay in Illinois, that otherwise would have gone to Washington.
For those of us that believe in home ownership and the opportunity to increase home ownership, particularly for first time home buyers, the new IRA will allow for penalty-free withdrawals for a down payment on a home. Of course, the education tax credits will make education more affordable for Middle Class families. Clearly a key part of the tax cuts included in our Budget plan, which was enacted into law, were tax cuts which will help provide greater opportunity for creation of jobs and greater opportunity for investment.
I am for a Capital Gains tax cut; I believe there should be a cut in the Capital Gains tax because I believe that Capital Gains taxes are punishing on the investment and on the creation of jobs. We succeeded in lowering Capital Gains for the first time in a over a decade; we succeeded in providing Death Tax relief for family-owned businesses, doubling the amount of the estate that can be passed on to the next generation to $1.3 million, hoping to keep the family business not only in the family, but in business; we succeeded in providing a Brown Fields tax incentive as part of our effort to revitalize blighted areas, to help private investors recover the cost of environmental clean-up in old industrial parks that require clean-up; and, for entrepreneurs, restored the Home Office deduction; and for the self-employed, increasing the heath insurance deduction to 100% over time.
Those are big victories for small business as well as big victories for entrepreneurs. We are already seeing results — if you look at the economic figures, unemployment is at the lowest level in decades, and we have already seen a 25% drop in interest rates in the last three years. That is progress. That is progress because we are working together.
The question I am always asked is "Where do you go from here?" We have had some big victories in balancing the Budget and cutting taxes. What is next?
I think there are a couple of areas we need to be working in. One, of course, is tax reform, restructuring the IRS, making our Tax Code simpler, and also making the tax collector more accountable. And, also making our government smaller and smarter and better — more responsive to all of you, the folks who pay the bills.
Ways and Means
I am privileged to be a member of the Ways and Means Committee — the Committee which writes the tax law. The Constitution says that all tax legislation must originate in the House, so as a member of the House, it is a good place to be if you want to have an impact.
Last week the President gave his State of the Union address. There were some things in his ideas, but there were also some disappointments in the President’s address. The biggest disappointment I had was his failure to mention a very important issue, important to 21 million families in our country. That is the issue of the Marriage Tax Penalty.
Marriage Tax Penalty
I usually ask two simple questions to really frame what the Marriage Tax Penalty is, and those are: Do Americans feel that it is fair that our Tax Code punishes a married working couple with two incomes with higher taxes than on an identical couple that lives together outside of marriage? Do the American people feel that is fair to the 21 million married working couples with two incomes to pay an average of $1,400 more in higher taxes just because they are married? In fact, the only way to avoid the Marriage Tax Penalty is either to choose to not get married, or to file for divorce. In Washington, D.C. $1,400 is not a lot of money; but in my home town, $1,400 is one year’s tuition at Joliet Junior College, 4 months of child care at a local day care center. It is meaningful. That is a tax that should not even be collected. Our goal is the elimination of the Marriage Tax Penalty which is a number one “must do” as we work on the tax provision of this year’s Budget negotiations.
We also want to restructure the IRS to make the IRS more accountable, more responsible, and a service-oriented agency, rather than a punitive agency. Last fall we began that work, and of course, we had Hearings that really highlighted the heavy-handed approach of the IRS in the past. We passed legislation out of the House and hopefully the Senate will move to the President by April 15 this year. The legislation provides 28 new rights for taxpayers. And the most fundamental reform that is included in the IRS restructuring legislation is something that is pretty important — that is, shifting the burden of proof with the IRS off the backs of the taxpayer and on to the IRS. If you have ever had a discussion where you personally have had to go to court with the IRS, you are treated as if you are guilty, and you have to prove yourself innocent. At the same time, if you are charged with a crime in a court of law, you are innocent until they prove you guilty. We believe you should enjoy the same rights with the IRS that you do in a court of law. Big change, and an important change, but a big victory for taxpayers.
Strengthen Programs That Work
We also want to make government smaller, smarter and better, and more responsive to the folks that pay the bills — the taxpayers. As we look at ways to make government smaller, smarter and better, we also want to strengthen those programs that work because there are some good programs in government. We want to make sure that they work and meet the needs of those that are to be served. There are a number of programs in the Federal government today that work and I believe they need to be strengthened, particularly in the area of housing — an area of concern for all of you.
I think the one thing we all recognize is that there is a real need for Affordable Housing for millions of Americans throughout this country — in cities, suburbs, and in rural areas. We have to make sure that the programs we have are good programs and work better. That is why I welcome this opportunity to work with you.
515 Works
When I look at programs that are very effective and work well — FHA single family home loan guarantee program, Low Income Housing Tax Credit, Mortgage Revenue Bonds, Section 515 and 521 — they all must be strengthened. We want them to work better; we need to work hard and we need to work together to make sure the programs are strengthened. And of course, also do a better job of serving those we hope will be served well.
The Low Income Housing Tax Credit is a program I believe strongly in. As a Republican, I believe it is the Republican way of solving problems. Think about it — Republicans always say we want the private sector to be able to do more rather than government. The Low Income Housing Tax Credit is the incentive to attract private investors to provide Affordable Housing to the working poor. That is a good promise; and, clearly it is a program that works. I have always been one that said it really should not be called the Low Income Housing Tax Credit; it should be called the Affordable Housing Tax Credit, which would be a much better name. Hopefully, in some of the changes we will be making this year, we might make that change and give it a name which I think is so much more appropriate. But, the Low Income Housing Tax Credit is responsible for creating over 155,000 new units of housing across this country; units put out there to be available for those that need Affordable Housing. In the District that I represent, Joliet is one of the largest communities; the Low Income Housing Tax Credit has been an effective tool for revitalizing old neighborhoods. In fact, we just broke ground and construction is actually under way now to rehab Joliet Catholic — a historical structure in the center of Joliet which was once home to a prominent Catholic high school. It will now be providing Affordable Housing to Senior Citizens.
But, there is another use to Low Income Housing Tax Credit — and, that is a recognition that housing costs are so high in California that the Low Income Housing Tax Credit is a way to provide Affordable Housing to those who are attracted to work in Silicon Valley or in the San Diego area. So, it meets the needs of millions of Americans. But, we need to do more.
Permanent LIHTC
This past year we had an important fight — a fight that we won because everyone worked together: developers, syndicators, non-profits, housing agencies, and legislators of both parties. That was an issue which should not have been needed to be addressed, but my friend and colleague, the Chairman of the Ways and Means Committee, felt that we should sunset the Low Income Housing Tax Credit. One thing I learned as a State Legislator and one thing I learned as a Representative in Congress is that it is the permanency of the Low Income Housing Tax Credit which makes it work so well. One of the questions I asked of the Connecticut Housing Authority’s director when they testified before the Ways and Means Committee, was: "Prior to 1993, compared to 1997, what is the difference between Temporary and Permanent in the amount of private capital that has been attracted to the investment of Affordable Housing because of the Low Income Housing Tax Credit?" He stated that in his state it was six to seven times higher because of the permanency. I asked a homebuilder, who was also testifying on that panel: “Why?” He said it was because investors want confidence in the permanency, knowing that the Tax Code will not change as it affects their investment. This is an important concern when you are trying to determine where you are going to put your investments, put your capital. We won a big victory because we explained why it was so important for it to be permanent; we worked together; and, we won that fight. And it is a fight, hopefully, that we will not have to fight every year, but we always need to be prepared to continue educating my colleagues in Congress about how important permanency of the Tax Credit is.
Higher LIHTC Per Capita
But we also must recognize that the value of today’s Tax Credit is not the same. We need to do more. That is why I support legislation to raise the Credit from $1.25 to $1.75. An effort, which of course, would increase the allocation, provide the potential for another 50,000 units of Affordable Housing to be made available to the working poor. I support that initiative. I am anxious to work with you.
I am also working very closely with Nancy Johnson (R - CT), who Chairs the Oversight Subcommittee to move the legislation which will encompass the change in the Credit so we can expand the opportunity for Affordable Housing. But we must also recognize that because of the political climate, because a majority of the Congress wants government to work better, that as we work to strengthen this program, that we need to look for ways of making it work better. The GAO Report gave us a number of ideas — ideas that we can, of course, implement to improve the Credit: requirements for market studies and regular site visits, deal with the issue of over-allocation in those states that over-allocate, and also require independent audits. Those are ideas that I believe have strong support. But we are also looking to the private sector — investors, developers, those who manage the properties — to help us and give us ways that we can make the Credit work better. Someone suggested the need for mixed-income reform; expanded opportunity for assisted living; increasing the individual’s Credit limit from $9,500 to $20,000 to offset the Alternative Minimum Tax (AMT); some have also suggested finding ways to consider some sort of tenant ownership or cooperative ownership for Low Income Housing Tax Credit properties. Those are ideas that have been suggested; I am anxious to hear more from you. We all are as we work to strengthen the Tax Credit.
515 Supporter
We also need to strengthen the other programs that help provide Affordable Housing in rural America.
I am a supporter of the Section 515 and Section 521 (Rental Assistance) programs because they help rural America provide Affordable Housing for those who need to live in rural America because that is where they work. And, that is where they want to work. Those two programs need to be given priority. We are anxiously awaiting the President’s Budget proposal this coming week in which he will indicate the specifics of what kind of priorities he gives to rural housing. As you know this past year, he recommended a significant reduction in funding for Section 515. Unfortunately, the Congress included that in the Budget that was passed; but we did increase funding for Section 521. The bottom line is that in the balanced Budget, we have to fight for every dollar we can find. Housing should be given a priority. And we have to work together if we are going to make it a priority.
Section 538
Section 538, of course, was initially a demonstration program. I support your position and am anxious to work with you to make it permanent. And, of course I want to point out that we passed legislation out of the House, and the Senate has acted with similar legislation; now we want to make it permanent, but also to guarantee $200 million in loans to developers of Affordable Housing in rural America. Soon that legislation will be completed in Conference Committee and, hopefully, sent to the President.
I want to mention very quickly three other issues I think we should watch carefully if we care about Affordable Housing in rural America. One, of course, is the need to raise the caps on Mortgage Revenue Bonds; currently it is about $50 per capita or $150 million in small states; we want to raise that to $75 per capita and $250 million. The bottom line is the Mortgage Revenue Bond helps us provide greater opportunities for home ownership all across the country — not just in rural America, but in suburbs and cities.
We are also expecting in the President’s Budget proposal, for those of you concerned about Real Estate as I am, that he will try again to eliminate Section 1031 — the issue of Like-Kind Exchanges for property. We won that fight last year; we maintained the status quo, and that is one of the areas where the status quo is good, but I anticipate the President will include the Treasury Department’s recommendation to eliminate Like-Kind Exchanges again. Of course, we need to fight that — again.
The last tax issue I would like to mention to you is the issue of Real Estate appreciation recapture. One of the issues that we lost on last year. I am one that believes we should treat Main Street the same as Wall Street. Unfortunately, even though we succeeded in reducing the Capital Gains Tax last year, Real Estate is treated differently. And we ended up with a 25% Capital Gains rate; while the sale of stock was given a 20% Capital Gains rate. My concern is that difference, to the average investor, will steer capital to Wall Street and away from Main Street. As one who believes that Real Estate creates jobs, I think it is very important that we work to correct that wrong and bring Real Estate to parity with Wall Street.
Results of Working Together
We have accomplished a lot in the last three years that I have been privileged to work with your Association. We have accomplished a lot of victories because we have worked together. Think about it. We have had some pretty big victories — balancing the Budget for the first time in 28 years; the first real meaningful tax cut for the Middle Class in 16 years; the first real Welfare Reform in 30 years. Those are big victories.
But, we have some big challenges ahead of us; that if we work together, we can meet. That is — making the tax collector accountable, eliminating unfair provisions in the Tax Code such as the Marriage Tax Penalty; making government smaller, smarter and better; and, also, something that is very important to all of us here, and that is making housing more affordable for Americans in cities, suburbs as well as rural America. Those are big challenges. And I am anxious to work with you, as we have in the last three years. I want to be a resource for you, but I also want you to be a resource for me — to share your ideas, your concerns, your opinions, if you think we are on the right track or the wrong track — the bottom line is we need to work together. And if we continue to work together, we can continue to make some big victories.