Repeal the Low-Income Housing Tax Credit and the New Markets Tax Credit

The low-income housing tax credit provides a credit for developers investing in designated affordable housing. It has two tracks: one is awarded non-competitively, and the other is allocated by state housing finance authorities. The low-income housing tax credit has come under scrutiny for high costs per housing unit developed when compared to conventional market-rate housing. The new markets tax credit provides credits for investment in distressed communities and is allocated competitively by the Treasury Department.

This option repeals the low-income housing tax credit and the new markets tax credit. Repealing the two credits would broaden the tax base, and in some cases, slightly increase the cost of capital, thus slightly reducing investment.

On a conventional basis, this option would decrease the primary deficit by $210.5 billion over the budget window. Long-run GDP would fall slightly, while long-run GNP would rise slightly. On a dynamic basis, the primary deficit would decrease by $202.7 billion from 2027 through 2036, $7.8 billion less than the conventional estimate. Incorporating changes in interest costs, the publicly held debt-to-GDP ratio would be lower than baseline, reaching 174.2 percent by 2056.

On average, in 2036, taxpayers would see decreases in their after-tax incomes of 0.1 percent. The top quintile of taxpayers would experience a 0.1 percent decrease, and the bottom quintile would also experience a 0.1 percent decrease. On a long-run dynamic basis, taxpayers would see a 0.1 percent decrease on average.