The $8,000 Tax Credit – What’s the True Cost?

Part 1 of 2.

The $8,000 Tax Credit has helped a few of my clients this year, but I’d argue that most of them would have been buying anyway – regardless of whether the government was offering free money.

Is it time to let this credit expire? Already I have spoken to folks who are looking to buy homes in Charlottesville who are concerned that:

1 – The $8,000 tax credit will expire on November 30, 2009 and they won’t be able to get the credit.

2 – The tax credit won’t expire and they will have rushed into purchasing a home that they may not have really and truly wanted

3 – They will buy and get the $8,000 but not the $15,000 homebuyer tax credit that has been proposed.

From today’s Wall Street Journal (the top-selling newspaper in the country)*

To keep the credit alive, some lawmakers are considering ways to offset its cost, for instance, by taking back unspent funds from the $787 billion stimulus bill, said Sen. Johnny Isakson (R., Ga.).

To persuade Congress to reallocate stimulus funds, supporters will have to show that the home-buyer credit would generate more jobs than the stimulus bill would, Mr. Pomeroy said.

Ted Gayer, a scholar at the liberal Brookings Institution, argued in a recent paper that the credit costs the government about $43,000 for each additional home sale it produces. That is because most of the two million or so home buyers expected to claim the credit would have bought a house anyway. Only about 350,000 were additional buyers. Expanding the credit to make all home buyers potentially eligible would swell the government’s cost per additional home sale to more than $250,000, said Mr. Gayer, co-director of economic studies at Brookings.

I’m a Realtor, and I make my living representing clients buying and selling real estate. But to continue to subsidize purchasing homes is short-sighted and wrong. The government should not be picking and choosing segments of the American economy to support.

The American people and economy are more than capable of creating their own uncertainty, thankyouverymuch.

* links in the quoted article added by me. This is an nifty story about Sen. Isakson, too.

Here are a few bills in Congress related to the $15,000 tax credit:

HR 214 – To amend the Internal Revenue Code of 1986 to provide a Federal income tax credit for certain home purchases.

S 740 – A bill to amend the Internal Revenue Code of 1986 to expand the homebuyer tax credit, and for other purposes.

HR 1344 – To amend the Internal Revenue Code of 1986 to extend and modify the homebuyer tax credit. (Title: Real Help for Homebuyers Act of 2009 – as opposed to “Fake” help)

HR 1453 – To amend the Internal Revenue Code of 1986 to extend and expand the homebuyer tax credit