Newspaper article St Louis Post-Dispatch (MO)

Tax Law Could Help Revive Cities

Newspaper article St Louis Post-Dispatch (MO)

Tax Law Could Help Revive Cities

Article excerpt

Neither the press nor real estate moguls seem to have noticed. But inner cities could reap a harvest of residential investment from a provision of the new budget-tax law that virtually repeals the capital gains tax on the sale of personal homes.

That's surely not what President Bill Clinton and the Republican Congress focused on when they decided to allow individuals up to $250,000 and couples up to $500,000 in tax-free gains on selling their residences. The politicos were just making another play to America's perennially pampered homeowners.

The idea of doing away with the housing capital gains tax originated with ht

Thomas Bier, head of the housing policy research center at Cleveland State University.

Through years of meticulous probing of people's house-to-house moves, Bier assembled statists showing that the 1951-vintage tax law virtually forced movers with accumulated house value to look away from the city, to buy "up and out" - to more expensive housing on the suburban fringe.

Home sellers had been obliged to pay capital gains tax - often large, after inflation - unless they rolled over their gain within two years into a new home worth at least as much. The sole loophole was value gained up to $125,000, and then only at age 55.

h "This single federal policy virtually dictates central city decline, and eventually inner-ring suburban decline," Bier said, "because it creates an extremely strong push toward more expensive homes."

Bier matched the names of tens of thousands of home sellers and buyers on the computerized property records of Cleveland and Cuyahoga County."We knew where people sold, what for, where they purchased, and for what price. We could track the movement of sellers across the region."

Bier arranged, through Ohio's Urban University Program, for parallel studies in Akron, Cincinnati, Columbus, Dayton, Toledo and Youngstown. …

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