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Testimony on New Homes Tax
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Testimony of the
American Homeowners Grassroots Alliance
Submitted to the
Senate Commerce Committee
Holding hearings on
Softwood Lumber Trade with Canada
February 14, 2006
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The American Homeowners Grassroots Alliance (AHGA), which serves the
nation’s 75 million homeowners, applauds the Senate Commerce Committee
for holding this hearing on softwood lumber trade with Canada. AHGA
supports free trade and opposes tariffs and other restrictions that
raise the price of homes and products used by homeowners and other
consumers. A free trade policy is in the best long-term interest of the
US and other countries, and results in the greatest benefit to
homeowners and other consumers in all countries. The fast changing world
economy and expanding trade between nations will continue to shift
competitive advantages from industry sectors in one country to those in
another. The appropriate solution to the inevitable challenges of worker
displacement and corporate profitability challenges that result is the
extension of unemployment benefits and an expansion of trade adjustment
assistance. AHGA supports strengthening trade adjustment assistance
programs; in particular by expanding funding for worker retraining so
displaced workers can qualify for employment in growing industries.
AHGA is disappointed by the support of the U.S. Commerce Department for
tariffs on softwood lumber from Canada that would impose an indirect tax
averaging $1,000 on many new homes built in the U.S. and would
substantially increase the cost of home additions and other remodeling
projects. A current tax of approximately 10% is imposed on Canadian
softwood lumber, a primary building component of new homes. These
tariffs make homes less unaffordable, especially to the most vulnerable
first time buyers who account for a substantial portion of the nation’s
annual 1.6 million new home sales. The tax would price almost 300,000
families out of the market and would make home additions and other
remodeling projects unaffordable for many more homeowners. It will add
substantially to taxpayer contributions to the cost of rebuilding homes
destroyed by Hurricane Katrina.
AHGA strongly opposes the tariffs. Those most affected will be first
time new home homebuyers and those who would otherwise barely qualify
for home ownership. Their purchases will be delayed until their earnings
increase. In the meantime they will lose the opportunity to build equity
in a home they could have owned. A recent trend toward increases in
mortgage interest rates will also keep home ownership out of reach for
many of them. While others will still be able to buy a home, many of
them will be paying interest for 30 years on the $1,000 home price
increase resulting from the tariff. The increase in cost for lumber in
home additions and other remodeling projects would also increase
substantially, and many of the nation’s 75 million homeowners would pay
the price.
AHGA is opposed to the implementation of tariffs and other restrictive
border measures because they deny the dream of home ownership to
millions of Americans and because they will prolong the current
recession. From an employment standpoint the tariffs could also
contribute to layoffs in the construction industry and its suppliers. We
urge members of the Committee to ask the Administration protect U.S.
consumers and ask Ambassador Portman not to include, in any agreements
with Canada, any provision that would impose a lumber-related tax,
quota, or other government-mandated cost increase on U.S. consumers.
We urge members of the committee to resist pressure from large U.S.
timber companies that support the lumber tariffs. Those companies
currently receive large subsidies from the U.S. government. While AHGA
is sympathetic to potential job losses in that sector, the tariffs would
only shift job losses to the home building and supply sector. They would
also deny home ownership to many more Americans, raise ownership costs
to many others, and undermine principals of free trade that benefit
homeowners and other consumers.
The American Homeowners Grassroots Alliance (AHGA) is a national
bipartisan advocacy organization representing the nation’s 75 million
homeowners. AHGA believes that policies that encourage and protect home
ownership are in our national best interest. Those policies encourage
and sustain the maintenance of a strong and broad middle class, build a
sense of community and responsibility, and facilitate investment in
homes, which are the largest, most universal savings/equity-building
vehicle for most Americans. AHGA’s positions and more information about
the organization are available at AmericanHomeowners.org. The American
Homeowners Foundation’s section of the website also contains free
educational materials to help homeowners and future homeowners buy,
sell, remodel, and finance their homes.
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