| GET OUT OF OUR HOMES: What’s an idea generally hated by experts, but embraced by both presidential tickets? Well, getting large hedge funds and private equity firms out of the housing market, for one. Both Vice President Kamala Harris and former President Donald Trump’s running mate, Sen. JD Vance (R-Ohio), have backed that line of thinking, as Katy O’Donnell of the Pro Financial Services team reported recently. They’re not alone, either: So does Robert F. Kennedy Jr., who’s now backing Trump, and Sen. Bernie Sanders (I-Vt.), who recently outlined his thoughts on the matter to Morning Tax. “Investment companies [have] been buying up affordable housing, jacking up rents substantially, adding to the very significant housing crisis that we have today. And that’s bad,” Sanders said. “So we have to provide disincentives to them.” But what kind of disincentives? Sen. Sherrod Brown (D-Ohio), a senior tax writer currently locked in yet another close race for re-election, has a bill that would ban institutional owners of 50 or more single-family homes from claiming deductions for depreciation or interest. MORE ON THAT IN A BIT, but first thanks for joining a “well, that was some Hail Mary” version of Weekly Tax. Only thing that could’ve been more exciting was the Timothée Chalamet look-alike contest. Apparently, it’s still up there and will be for awhile: Today marks 53 years since the U.K. launched the Prospero satellite, which was the first British satellite sent into orbit by a British rocket. (A previous British satellite had been launched by an American rocket.) Give this newsletter some fuel. Send your best tips and feedback. Email: bbecker@politico.com, bfaler@politico.com, bguggenheim@politico.com and teckert@politico.com. You can also reach us on X at @berniebecker3, @tobyeckert, @brian_faler, @ben_guggenheim, @POLITICOPro and @Morning_Tax. Want to receive this newsletter every weekday? Subscribe to POLITICO Pro. You’ll also receive daily policy news and other intelligence you need to act on the day’s biggest stories. BACK TO HOUSING: Lots of hedge funds buy houses outright in cash, one reason that critics charge that investors have an upper hand in the market in the first place. Those kinds of buyers would take a hit without a tax break for depreciation, a deduction that, under one common system, adds up to 3.636 percent of a property’s value every year. But not being able to deduct business interest might not matters as much to investors snapping up houses, especially if those purchases weren’t debt-financed. That’s in part because the GOP’s 2017 tax law put a stricter cap on business interest deductions. (For whatever it’s worth: Senate Republicans blocked this year’s bipartisan tax bill, which would have restored the more generous write-off for interest.) Harris’s point-of-view: A former aide to Harris, granted anonymity to speak candidly, said that the vice president frequently heard from constituents in California about issues like increased rents and bad management that arose from investors owning homes. It’s a phenomenon that has borne particular scrutiny in Harris’s hometown of San Francisco. “If you’re a private equity company, you could buy this asset, you could depreciate this asset, you could be making money without actually renting it, depending on the cost of capital. It’s insanity,” said Zach Conine, the Nevada treasurer, who has been working for years to address the housing crisis in his state. “We should not be incentivizing institutional investors in the same way that we’re incentivizing people buying their first home with a VA loan.” Private equity investors typically earn two percent of their investment in an asset once those funds are deployed, so that adds an incentive to buy houses, according to Conine. Investors can then make money from the asset by depreciating the cost of the house, even if the house isn’t occupied or rented, Conine says. Hello from the other side: Republicans, for their part, think Brown’s legislation is a terrible idea and that it would only limit housing supply. One GOP tax writer, Rep. Greg Murphy of North Carolina, said that Harris’ endorsement of the legislation showed her true colors. “Her mantra, which she’s trying to hide from now, is that government intervention is best,” he said. Groups like the Real Estate Roundtable, which represents financial firms, lenders and other real estate entities in the housing market, and the National Home Rental Council, which represents owners, builders and vendors of rentals has also made opposing the bill a significant priority in the past few years. “Depreciation deductions and interest expense deductions. They’re not tax breaks. They’re the cost of doing business,” Ryan McCormick, senior vice president of RER, told Morning Tax. The broader view: Brown’s bill is just one of a hodgepodge of tax proposals aimed at addressing the housing shortage. Others include the affordable housing tax credit, which lawmakers attempted to expand in that above mentioned bipartisan tax package, and the mortgage interest deduction. Republicans limited that deduction, which JCT found cost about $30 billion just in 2020, in the Trump tax cuts, so that only the first $750,000 of mortgage debt could benefit. Further limits have been floated by conservative and left-leaning analysts, since a variety of studies have questioned how much the tax break actually does to encourage home ownership. “The question is, of course, the lower you can put that cap, the more and more folks will get with a tax hike,” said Garrett Watson of the Tax Foundation, who noted that lawmakers faced a similar question with the deduction for state and local taxes. The real estate lobby would surely also oppose any further effort to curb the mortgage interest deduction, particularly since fewer taxpayers now itemize because of the 2017 tax law. WHAT’S A PROPOSAL, REALLY? Trump has now said multiple times in recent days, in different forums, that he would love to get rid of the federal income tax and replace it with a system dominated by tariffs. But now even Vance is pooh-poohing how seriously to take that idea. “Donald Trump didn't propose that. He set that as an aspirational goal,” Vance said on NBC’s “Meet the Press” over the weekend. As it happens, that’s the exact same phrase — “aspirational goal” — that a senior Trump campaign official used, after the former president once again talked up the idea in an interview with the podcaster Joe Rogan. To be clear, experts say there are some very real math problems with the trade that Trump is talking up. In short, there’s just not enough potential revenue that could be generated from tariffs to replace the income tax. And if there was, experts say it would also be a much more regressive system than what’s currently a rather progressive federal income tax. Vance and the Trump campaign, meanwhile, are instead trying to focus on the actual income tax cuts that the former president has also proposed. The GOP platform calls for extending all the temporary parts of the Trump tax cuts, which are set to expire at the end of 2025, not to mention all the other more targeted tax relief ideas that Trump has floated in recent months. “What is very real about what Donald Trump has actually proposed, his specific policy proposals, is that we want to eliminate taxes on tips. We want to eliminate taxes on overtime pay,” Vance said on “Meet the Press.”
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