During a House Oversight Committee hearing last week, Rep. Glenn Grothman (R-WI) spoke about welfare benefits.
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00:00Thank you very much. I'm going to call upon myself to begin to ask some questions. Just
00:09a brief comment. Look, the Earned Income Tax Credit is just one more program. The more
00:14you work, the more you lose the money. If you marry somebody with an income, you lose
00:19the benefit. But I'll start with Mr. Edwards. This LITEX stuff, I've really delved into
00:28it for the first time in the last week. And I have a feeling whoever came up with it and
00:36lobbied Congress to begin it was not the poor people who was designed to benefit, it was
00:41the property developers. But you said that it benefits the developers and middlemen more
00:49than the average American. Could you elaborate on that a little bit? I think it's so true.
00:54The reason why that is is because as the recent MIT study that I mentioned, which was a very
01:02detailed study, it collected data from hundreds of LITEX projects across 40 states, found that
01:07the average rent savings from LITEX buildings compared to nearby private market unsubsidized
01:14buildings is only 12%. Other studies find there's really not that much difference between rent
01:19and LITEX buildings. So the Feds give 14 billion in tax credits. So where do the benefits go?
01:26A number of studies find that most of the benefits go to the developers because the system is so
01:32complex. We also know this is true because there's a huge, intense competition at the state
01:42and city level to get these credits by the developer. That's how we know they're extremely lucrative,
01:47because they all want to get these benefits. So that's been the general conclusion from
01:51the academic literature.
01:52Do you know about percentage-wise, and we're working on a change in LITEX right here, do
01:58you know percentage-wise how much the cost of a building is paid for by the tax credits?
02:03Well, essentially all of the cost of the building is paid by the tax. I mean, the 9% credit
02:10covers 70% of the cost of construction. That's kind of the standard. But the investors get more benefits
02:16than just the credit. They get the benefit of the tax losses that flow from the projects,
02:21and they get the benefit potentially in 15 or 30 years from selling the buildings and getting a capital gain.
02:26My God, you mean 70% of the building is paid for by the government, but the developers and the syndicates
02:33are the ones who wind up owning it?
02:35That's right. The investors own it. The 9% credit gives a 70%, covers 70% of the cost of construction. And again,
02:45that's only part of the tax benefit that the investors get.
02:48Oh my God, no wonder so many people are running around here trying to keep that program going. Is there a better way to, if it's the government's business, a better way to set up housing to help people?
03:02Well, I mean, I talked in my testimony about deregulation and tax cuts. One thing that's striking that is often overlooked is property taxes on apartment buildings are far higher than single-family homes.
03:15There's no good reason for that. Property tax rates should be the same across the board. So there is a bias in local government tax codes against people who live in apartment buildings.
03:24For Congress, I think that in 1986 Congress increased the depreciation lifespan on buildings. That was a mistake. It increased taxes on apartment buildings. I think Congress ought to fix that mistake and reduce the write-off period for apartment buildings to get more private sector investment.
03:43Okay. Mr. Carson, you know, we're talking about housing here and we can talk about Section 8, but we're also talking about SNAP.
03:51We're talking about a variety of other programs. And it's not unusual. Is this your experience that, say, a single mom, if she wants to marry a guy, maybe even the father of her children,
04:04or the guy's making 40, 50 grand a year, that she would lose tens of thousands of dollars in benefits?
04:14Unfortunately, that is the case. And it becomes a lifestyle, a way of living.
04:21You know, I grew up in poverty and I listened to a lot of the people who were on these programs and the various schemes that they would come up with.
04:30Rather than trying to figure out how to get out of poverty, rather than trying to figure out how to improve...
04:37I think we can't hear you. Can you press the...
04:40It is pressed.
04:41Okay, go ahead.
04:43Go ahead.
04:44Yeah. But rather than trying to figure out how to improve their lives, improve their education, improve their income,
04:51they were always trying to figure out how to get around the various rules.
04:56I've heard that, too. It's like a full-time job to make sure you keep the money coming.
05:00Yeah.
05:01Mr. Husak, yes or no, are there marriage penalties in housing assistance programs like Section 8?
05:11Definitely, and it's because of the rule, the 30% rule. You pay 30% of your income in rent.
05:19So, as your income goes up, you pay higher rent. If you get married and there's two incomes, you pay higher rent still.
05:27Does that sometimes cause people not to get married, you think?
05:30I think it's a...
05:31Logically, it is a disincentive to marriage.
05:34Right. And I think if more congressmen got out of the showing up at fundraisers and spent time with average people,
05:41they would come up with tons of examples of people who are specifically not married to keep these things going.
05:48In any event, I used up my time. We're going to give ourselves a chance to ask questions later.
05:54But I'll...
05:55I'll...