According to Investopedia, The Say’s law of markets is an economic rule that says that production is the source of demand. According to Say’s Law, when an individual produces a product or service, he or she gets paid for that work, and is then able to use that pay to demand other goods and services.
The rule is named for 18th-century French classical liberal economist Jean-Baptiste Say, said to be influenced by Adam Smith. He advocated laissez-faire economics.
The tax overhaul House and Senate Republicans takes a page out of this theory, as did “trickle-down” economics assumptions that heavily informed the last big re-engineering of tax code in the mid-1980s.
In housing, we know that more production would be the source of more demand. New residential construction as a component of residential investment pulls more than its weight as a multiplier-effect contributor to consumption that drops down to the bottom line of economic growth.
As the economy grows and puts more people back to work, those fundamentals of job growth should feed naturally into household formation, and a demand pathway into both rental and for-sale housing preference.
We’ll debate the effects of shifting subsidies from the mortage interest deduction and state and local tax and property tax deductability to a big lumpsum standard deduction on housing demand all day.
If Republicans can keep the little fissures that keep cropping up toward the end of their reconciliation process and use their majorities in both houses to approve tax reform legislation, it’ll get the President’s signature within a week.
Then we’ll see how all these new theories about what will cause more production, more demand, and a healthier housing economy will work in the real world.
Fortunately for me, I have an able team of associates on the BUILDER and Multifamily Group content teams who’ll follow this through to its conclusion and let you know first-hand what you need to know about what the new tax laws may change effective Jan. 1, and what transition periods may get set up for migration from current practiices to the new rules.
I’ll be back Dec. 26, after a vacation week, and join you on the next stretch of the journey.
I’m grateful for my team’s tireless efforts at producing valuable insight, and I wish you all the best as we celebrate this holiday season.
