As Republicans assemble their tax reform legislation, Cato has released a study on one corporate tax break that is ripe for repeal. In “Low-Income Housing Tax Credit: Costly, Complex, and Corruption-Prone,” Vanessa Brown Calder and I describe the multiple failures of this tax credit.
The LIHTC is inefficient and bureaucratic. It breeds corruption in local governments and crowds out market-based housing. But by chanting “low income” and “affordable housing,” special-interest groups have distracted attention from the large LIHTC subsidies that flow to developers and big banks.
Republicans are hunting for revenue offsets for their tax bill. Under current law, the LIHTC will reduce federal revenues by almost $100 billion over the next decade, with 95 percent of the tax benefits going to corporations. Repealing the LIHTC would simplify the tax code and generate revenues to offset the corporate tax rate cut.
The LIHTC study is here.