of American Housing and Economic Mobility Act of 2024presented by Rep. Emanuel Cleaver (D-Mo.), aims to address critical housing affordability and related economic challenges across the United States. This comprehensive legislation includes a wide range of measures designed to ease the housing crisis, lower costs for renters, make it easier to buy homes and implement important tax reforms. Key provisions include:
Encouraging the construction of new housing: The bill promotes the development of new housing units, particularly in areas facing severe shortages, to help meet demand and stabilize housing prices.
Lowering costs for renters and making it easier to buy homes: The Act introduces various measures to ease the financial burden on renters and provide greater opportunities for first-time homebuyers and veterans to enter the housing market.
Tax reforms: At the heart of the bill are proposed tax changes, such as returning wealth tax thresholds to previous levels and closing existing tax loopholes. These reforms are intended to increase federal revenue and ensure that the tax system is fairer.
Incentives for local government: The legislation encourages local governments to remove restrictive land use regulations that artificially increase housing costs, thereby promoting more affordable housing development.
Limiting the influence of private capital: The bill aims to curb the growing influence of private equity firms in the housing market, which has contributed to rising housing prices and reduced availability.
Expanding access to credit: The act also expands access to credit through financial institutions, particularly for underserved communities, to support home ownership and economic mobility.
The American Housing and Economic Mobility Act of 2024 has garnered significant support from various nonprofit and advocacy groups, as well as key senators such as Elizabeth Warren and Raphael Warnock. Its prospects for passage, however, depend on successful negotiations within the Democratic-majority Senate and the Republican-controlled House. The bill's chances could be further strengthened if it is integrated into larger legislative initiatives such as the American Jobs Plan in a future Harris administration.
Property Tax Reforms
One of the most influential aspects of the bill is its proposed changes to the wealth tax system. The American Housing and Economic Mobility Act of 2024 aims to return estate tax thresholds to the levels that existed in 2009 at the end of the George W. Bush administration. This includes:
Property tax rates: The proposed estate tax rates are structured progressively, with a 55% tax on estates worth up to $13 million, 60% on amounts over $13 million but not more than $93 million, and 65% on amounts over $93 million dollars.
Low Exclusion Threshold: The estate tax exemption threshold is set to be reduced to $3.5 million, a level last seen in 2009. This reduction is intended to increase the number of estates subject to the estate tax and generate additional federal revenue.
Addition for high income properties and trusts: The bill introduces a new surcharge for high-income estates and trusts, consisting of a 5% tax on the portion of modified adjusted gross income that exceeds $200,000 and a 3% surcharge on the portion that exceeds $500,000. MAGI, in this context, is defined as adjusted gross income less deductions for investment or business interests. In particular, charitable trusts are exempt from this allowance.
Limitations on the foreign tax credit: The legislation also proposes changes to limit the foreign tax credit for estates and trusts, which will be adjusted to reflect the highest applicable tax rate.
Option to choose corporate tax rates: Another innovative feature is the option for individuals to choose to be taxed at corporate rates, with corresponding adjustments to the tax code.
Interest on tax deferrals: The bill addresses interest on deferred tax liabilities for estates and trusts by proposing modifications to applicable tax rates to reflect current economic conditions.
Potential impact on properties if approved
If passed, the American Housing and Economic Mobility Act of 2024 would profoundly impact estate planning and wealth transfer strategies. Lowering the estate tax exemption threshold to $3.5 million would dramatically increase the number of estates subject to federal estate taxes. Currently, according to IRS figures, 0.2%, or 1 in 500, estates pay federal estate taxes. In 2009, 0.7%, or one in 140, properties paid taxes in 2009. The median value of a single-family home was $185,000 in 2009 and $420,000 in 2024, according to the National Association of Realtors. This could lead to a significant increase in estate tax liabilities for high net worth individuals and middle class individuals, requiring more sophisticated and costly estate planning techniques to mitigate tax exposure. This will also significantly affect the ownership of businesses, farms and other illiquid assets as the tax must be paid within nine months of the date of death, forcing either a loan or the sale of the illiquid asset.
The historical context of the proposal
The proposal to return estate tax caps to pre-2010 levels and introduce progressive rates is not without precedent. The wealth tax has been a controversial issue in US tax policy for decades, with significant changes occurring during the administrations of George W. Bush and Barack Obama. The estate tax exemption was gradually increased during the Bush administration, reaching $5 million per individual by 2010. However, subsequent adjustments under the Tax Cuts and Jobs Act of 2017 increased the exemption to $11.7 million dollars per individual, significantly reducing the number of properties subject to taxation. The current proposal seeks to undo these changes to raise federal revenue and address wealth inequality, reflecting a broader shift toward more progressive tax policies.
CONCLUSION
The American Housing and Economic Mobility Act of 2024 represents a bold effort to address the housing crisis and address economic disparities through housing initiatives and tax reforms. The proposed estate tax changes will have far-reaching implications for estate planning and wealth management in the United States. As the bill moves through the legislative process, its success will depend on broad political support and its integration into larger policy frameworks. If passed, the bill could reshape the country's housing and tax policy landscape, with lasting effects for generations to come.