Homebuilders gloomy, asset managers relieved over tax plan


              In this Sept. 27, 2017 file photo, President Donald Trump speaks in Indianapolis. Trump promised Americans “the largest tax cut in our country’s history,” but there’s not much in Trump’s plan to help low-income households. One independent analysis says low-income families would save about $60 a year. Another says their incomes would go up less than 1 percent. Congressional Republicans say the critiques are premature because the plan is incomplete.(AP Photo/Michael Conroy)
In this Sept. 27, 2017 file photo, President Donald Trump speaks in Indianapolis. Trump promised Americans “the largest tax cut in our country’s history,” but there’s not much in Trump’s plan to help low-income households. One independent analysis says low-income families would save about $60 a year. Another says their incomes would go up less than 1 percent. Congressional Republicans say the critiques are premature because the plan is incomplete.(AP Photo/Michael Conroy)

Proposed changes in the GOP tax plan could affect homeowners in more expensive neighborhoods and car buyers interested in electric vehicles. Future retirees and asset managers are happy about a change that didn't materialize. A look at how the GOP tax plan could impact certain industries:

HOMEBUILDING

The tax plan contains some unpleasant surprises for those thinking about buying a new home, particularly in high-cost areas. As a result, shares of homebuilders dropped, with luxury homebuilder Toll Brothers leading the decline.

The plan would limit the mortgage interest deduction on newly purchased homes to the first $500,000 of the loan, instead of the present $1 million limit. The plan also caps the deduction for property taxes at $10,000. Svenja Gudell, CEO of housing data provider Zillow, said the changes could raise the tax bill for high-income homeowners in high-tax states, such as New York, Florida and California. Jerry Howard, CEO of the National Associated of Home Builders, said any slowdown in the housing market in those states could put other markets at risk.

Toll Brothers dropped 5.2 percent, while Lennar and Hovnanian fell more than 2 percent. Other homebuilders saw smaller declines. Up until Thursday, most homebuilders have posted impressive gains so far this year.

The proposed changes also hit shares of home improvement retailers. Lowe's fell 3.2 percent and Home Depot slipped $2.84, or 1.7 percent, to $162.54.

ELECTRIC VEHICLES

Car buyers might be less charged up about electric vehicles. The plan eliminates a $7,500 federal tax credit for buyers of electrics after the current tax year. Industry analysts and environmental groups quickly predicted a plunge in EV sales. Even with the credit, electric vehicles are less than 1 percent of U.S. auto sales, and that's likely to decline further.

"If you eliminate the tax credit, it's going to be a big whack to electric vehicle sales," said Gartner analyst Michael Ramsey.

Eventually the cost of batteries will come down so much that EV sales will rise without tax credits, said Xavier Mosquet, a senior partner at Boston Consulting Group. He predicts EVs will be comparable in total ownership costs to gas-powered vehicles between 2025 and 2030. Electric cars require no fuel and less maintenance than gasoline cars.

And it's not for certain yet that the credit is gone. General Motors said in a statement it will work with Congress to keep the incentive.

Shares of electric car maker Tesla Inc., which on Wednesday reported its worst quarterly loss ever, plummeted 8 percent.

ASSET MANAGERS

Future retirees as well as asset managers exhaled after House Republicans decided to leave the 401(k) retirement account alone.

Congress had been considering changes that investors feared would cause workers to sock away less in retirement savings each year. Such a change would mean smaller flows into the mutual funds and exchange-traded funds run by T. Rowe Price, BlackRock and other asset managers, reducing the fees they could earn.

Currently, workers under age 50 can contribute up to $18,000 in a 401(k) account annually on a tax-deferred basis. Older workers can delay taxes on even more, with a pretax contribution limit of $24,000.

Congress had reportedly been considering curtailing the annual pretax limit to as low as $2,400. The average worker funneled $5,850 of their paychecks into a 401(k) over the 12 months through June, according to Fidelity. At plans for which Vanguard keeps records, 10 percent of participants contributed the maximum last year.

Area lawmakers react to plan

Area lawmakers respond to U.S. House tax-overhaul plan:U.S. Sen. Bob Corker, R-Tenn.: "I cannot stress enough that what I care about is doing this right and implementing sound policy. As I have made clear from the beginning of this debate, it is my hope that the final legislation – while allowing for current policy assumptions and reasonable dynamic scoring – will not add to the deficit, sets rates that are permanent in nature, and closes a minimum of $4 trillion in loopholes and special interest deductions."U.S. Sen. Lamar Alexander, R-Tenn.: "You don't need to be an accountant to know that our tax code is too complicated, takes too many dollars away from Tennesseans and makes it harder to create good-paying jobs. The House ... is taking a critical step today toward enacting tax reform this year and I look forward to reviewing their proposal. I will continue working with President Trump, Chairman Hatch, and my colleagues in the House and Senate to help create a simpler and fairer pro-growth tax system that will keep more money in Tennesseans' pockets and grow Tennessee jobs."U.S. Rep. Chuck Fleischmann, R-Tenn.: "This plan greatly simplifies our tax code and will ensure hardworking Tennesseans keep more money in their pockets. Additionally, this plan finally addresses the burdensome taxes on our businesses that have stifled growth and led to more and more of our jobs being shipped overseas. ... The Tax Cuts and Jobs Act presents a tax plan that works for, not against, American families and businesses."U.S. House Budget Committee Chairman Diane Black, R-Tenn.: "Today, we took action to present comprehensive tax relief that lowers rates, simplifies the code and gets rid of loopholes so that American families get relief from the crushing burden of high taxes. ... Our goal has always been to relieve the tax burden on middle income families so they can save for the future with a simpler and fairer system."President Donald Trump: "I called Diane Black and you came through, Diane."U.S. Rep. Steve Cohen, D-Tenn.: "We worked hard to get [state] sales taxes deductible. The GOP plan eliminating the deductibility of sales taxes would take money out of Tennessee. If you can't deduct it, it goes to Washington."

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