In November 2008, voters clearly decided they were unhappy with the direction of the country and voted to change the political landscape. They elected Democrat Barack Obama as president, and put large Democratic majorities in charge of both houses of Congress and in Wisconsin, both houses of the Legislature.
In November 2010, as they did in 2008, taxpayers voted to change the political landscape. They put Republicans in charge of the House of Representatives, elected a new Republican governor in Wisconsin and large GOP majorities in both houses of the Wisconsin Legislature.
With voters expressing two distinctly different opinions on who should be in charge over back-to-back elections, policymakers have a difficult and unsettled task ahead of them.
The federal government is divided. Republicans control the House while Democrats control the Senate and White House. In Wisconsin, Republicans control both houses of the Legislature and the Governor’s office. But nine recall elections underway in the state Senate threaten to displace the GOP single party power structure currently in place. How does all this uncertainty affect our issue agenda? A few observations are in order.
Congress
Accomplishing legislative goals in the divided Congress is far more difficult than passing legislation when one party controls the entire process. The National Association of REALTORS® (NAR) is working on important issues that matter to our members and homeowners, in an environment that presents a real challenge to getting anything accomplished before the 2012 elections.
Take the mortgage interest deduction (MID). In 2010, the President’s National Commission on Fiscal Responsibility and Reform (the Deficit Commission) issued a report identifying tax and spending changes to reduce the deficit. This report called for eliminating the MID for second homes and reducing the amount of allowable mortgage debt from $1 million to $500,000. It further proposed to convert the deduction to a 12 percent tax credit.
In the Republican-controlled House, Budget Committee Chair Paul Ryan (R-WI) has proposed a Republican budget that would overhaul the tax system and reduce the maximum tax rate from 35 percent to 25 percent, acknowledging certain tax benefits would need to be eliminated or reduced to help pay for it. In the Senate, there is no specific plan. So significant potential changes to the mortgage interest deduction is “on the table” with the President’s proposed budget, with House Republicans and possibly Senate Democrats. Divided government has the mortgage interest deduction in limbo.
The NAR is working hard to remind Congress a significant change to the tax rules that apply to home ownership would damage the fragile market and cause home values to decline. The goal of NAR is to protect MID and avoid more disruption to the housing market. For many in Congress, the primary goal is deficit reduction and/or major tax reform. This may sound easy, but it isn’t. Democrats and Republicans are struggling to reach a compromise and REALTORS® and MID will continue to be a big part of the discussion.
Wisconsin Legislature
The November, 2010 elections turned Wisconsin government from blue to red. Republicans now control the process and, unless the pending recall elections swing control of the State Senate back to Democrats, the GOP has large enough margins in both houses to pass their priority legislation with or without support from minority Democrats.
The November, 2010 elections turned Wisconsin government from blue to red. Republicans now control the process and, unless the pending recall elections swing control of the State Senate back to Democrats, the GOP has large enough margins in both houses to pass their priority legislation with or without support from minority Democrats.
But what if Democrats take the Senate this summer? How could a newly-divided Wisconsin legislature effect housing or other issues important to the WRA? The good news is that many WRA housing issues are nonpartisan and receive bipartisan support. But there are a few issues that will fall into a more partisan divide, and a divided legislature could spell trouble.
Start with health savings accounts, or HSAs. Democrats, in general, oppose HSAs, Republicans traditionally support them. Until Scott Walker was elected and the GOP controlled both houses, HSAs were on the WRA’s priority list. Once Republicans were in control they passed the legislation in 30 days and Governor Walker signed the bill into law. Given our experience over eight years, it’s entirely reasonable to assume HSAs would not have passed without GOP control of both houses and the governor’s office.
Another partisan issue, especially this year, is “property tax relief.” Walker and the GOP legislature want to cut spending to reduce the $3.6 billion dollar deficit, in part by placing strict property tax levy caps on local governments and schools to keep levies from rising to offset state government aid cutbacks. Democrats oppose these spending reductions while Republicans say this is what they were elected to do. Democrats have lined up against “draconian” cuts and Republicans say they are “fixing” a long-term problem (the structural deficit) while protecting homeowners from massive property tax increases. Here again, deficit reduction and property tax relief have become partisan issues that could be impacted by a divided government.
The WRA has made stable or lower property taxes a priority given lower government revenues and the size of the state spending cuts. If Republicans maintain control of both the Senate and Assembly, the tax levy caps are likely to pass. If the state Senate swings to Democrats, the levy caps will be far more difficult to pass. That’s why Republicans are moving swiftly on the state budget. They intend to pass the budget bill before the July/August Senate recall elections.
These are just a few examples of how our issues can be affected by the political outcome from federal and state elections. Between now and August, Wisconsin voters will take part in an unprecedented nine recall elections that could, depending on the outcome, affect them in many ways. And REALTORS® will be a part of this historic process for one very important reason: elections have consequences, good and bad, depending on your point of view. The only bad decision is not getting involved and letting others make the decisions for you.
Joe Murray is Director of Political and Governmental Affairs for the WRA.