Coalition of the Unwilling

December 8, 2009

Comments Regarding Proposed Amendment to Definition of Candy

One of the major lobbying forces in Washington is the home builders’ lobby. The National Association of Home Builders (NAHB) is the most visible manifestation of the lobby whose major accomplishments include the First Time Homebuyer Credit. Though there is currently internal division (gated site) in the home builder industry between large and small firms.

The problems begin over a provision that allows firms to write-off of loss. The law previously was that firms were able to write-off losses for two years. The provision which passed in November expanded this to five years. Large home builders viewed this as a positive step because it would allow them to smooth out losses over a longer period of time and reduce their tax liability. Small home builders worried that this would give large home builders an incentive to sell off homes at lower prices in order to take advantage of the tax gain. This would in turn lower the prices of homes further for the small home builders. This battle has become so heated that the large home builders have formed a new association called Leading Builders of America.

The creation of Leading Builders of America highlights the fact that seemingly homogeneous businesses can have real differences. These groups are designed to maximize the political favors of their members. When the lobby no longer represents all members a new lobby is formed. Unfortunately the homebuilders have built their lobby on sand of tax credits and exemptions instead of the rock of sound tax policy.

On a related housing tax note – The Tax Foundation recently did a podcast with Professor Dennis Ventry on the Mortgage Interest Tax Deduction.


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