Panel Warns of High Price in Tax Proposals

President Reagan’s tax reform proposals would increase rents, lower the value of owner-occupied housing, increase the federal debt and cost more than 200,000 construction jobs, a report by a panel of economists said Sunday.

The study said the proposed changes in the tax treatment of investment in conventionally financed rental housing, the elimination of favorable tax treatment of investment in low-income rental housing and the elimination of the tax-exempt status of industrial development bonds would “halt the approximately 20% to 30% of all rental units currently being financed at below-market rates by state and local housing finance agencies.”

The study contends that the proposals would raise rents by 20% to 24% by 1991.

“Even modest rent increases would be sufficient to completely offset any advantage low- and moderate-income households might gain as a result of the proposed tax cuts,” the study said, adding that a couple making $25,000 a year could expect tax savings of less than $100 a year, but could see their rent increased by between $700 and $1,100 a year.

Coalition Identified

The report was prepared for Tax Fairness for Housing Coalition by William Apgar and H. James Brown of the Joint Center for Housing Studies of Massachusetts Institute of Technology and Harvard University and Arthur Doud and George Schink of the Wharton Econometric Forecasting Associates Inc.

The absolute dollar value of the proposed tax cuts “pale in comparison to the three major hidden taxes”--rent increases, property value declines and state and local tax increases--contained in the Administration proposal, the study said.

The study also said that under the Reagan plan, interest rates, considered by many the key to lowering the federal deficit, would be unlikely to decline.

The reduction in housing and business investment in structures would reduce employment in construction, with a maximum loss of 212,000 jobs in 1994 relative to no-tax-reform levels, the study said.

The federal debt would increase by about $53.3 billion by 1990 and by $112 billion by 1994 over no-tax-reform levels, the study added.

Also, the study said, “decreases in the value of the single family housing stock would increase mortgage default rates.”