Tax Reform & the Low Income Housing Tax Credit

Republicans have promised major tax reform, and Cato has suggestions for policymakers. In today’s Wall Street Journal op-ed, Chris Edwards and I argue for the elimination of the Low Income Housing Tax Credit (LIHTC). For those unfamiliar with the program, LIHTC is a corporate tax loophole that endeavors to create low-income housing. Unfortunately, research suggests the program has substantial difficulty doing that.

In the article, we describe a few of LIHTC’s problems: LIHTC mostly benefits developers and intermediaries, crowds out private market housing development, and receives minimal oversight. The latter issue leads to abuse.

We also point out that there are more effective ways to increase the supply of low-cost housing. Still, LIHTC’s advocates stubbornly overlook its failings.

Although willful blindness might be a natural posture for interest groups, it is a bad look for policymakers. Legislators should use tax reform as an opportunity to reduce loopholes and corporate cronyism, while reducing rates. 

Read the details here.