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

By: Steve Heydel

Steve Heydel — Fri, 06 Nov 2009 21:50:12 +0000

Jim:
Well, as you know the $8K tax credit has been extended and more provisions added. I have some real problems with this, as I outlined on ActiveRain
http://activerain.com/blogsview/1323781/is-the-extended-tax-credit-really-a-good-idea-
I am mainly concerned that, for a quick fix, we are simply setting ourselves up for another round of foreclosures; today’s unemployment rate was announced at 10.2%, and with the underemployed and those who have simply given up its probably around 16%. We have yet to see the bottom of this recession (can anyone say “depression”?) and the gummint is simply buying time with this.
It really, really bothers me that so many realtors see this as a good thing; sometimes you have to look beyond the end of your own nose to what is good for the country.

By: Homebuyer Tax Credit (May Be) Extended | Real Central VA

Homebuyer Tax Credit (May Be) Extended | Real Central VA — Thu, 29 Oct 2009 11:23:14 +0000

[...] I’m not in favor of artificially supporting any market, but at the very least we may be on the path to some clarity … one of the worst things the government can do is confuse the public – they need to put these questions to rest: [...]

By: $8000 Tax Credit: T-Minus 45 Days

$8000 Tax Credit: T-Minus 45 Days — Fri, 16 Oct 2009 19:54:10 +0000

[...] For a more in-depth conversation on the topic, check out Jim Duncan’s RealCentralVA Blog… [...]

By: michael guthrie

michael guthrie — Fri, 16 Oct 2009 15:48:38 +0000

I understand your point. The Grantor’s Tax (which is a incident specific tax) is in place and I don’t think going away any time soon. At the end of the day, if more homes sell and the Grantors tax gets paid, it hopefully means other taxes won’t have to be increased.

By: Jim Duncan

Jim Duncan — Fri, 16 Oct 2009 15:39:33 +0000

You almost had me until you mentioned the Grantor’s Tax. The thought of the federal government borrowing money and taking tax money from taxpayers, then giving money to taxpayers … to pay taxes is unconscionable.

By: michael guthrie

michael guthrie — Thu, 15 Oct 2009 21:09:18 +0000

Obviously, at some point, the amount does not make sense. To some, the 8K is too much but when you take into account all the different aspects of what a home sale creates (State Grantor tax, the savings from homes not having to be bought by the banks, along with what I mentioned in my earlier post) a case can be made that the 8K given is more than made up for by the other areas positively effected.

By: Jim Duncan

Jim Duncan — Thu, 15 Oct 2009 20:58:21 +0000

Michael –

Thank you for the comment, as always.

Then where do we stop? Why not give everyone $100k to spend as they see fit? That would certainly stimulate the economy.

Where is the $8k or $15k coming from?

Of course, I’m against TARP and the whole concept of “too big to fail.”

By: Jim Duncan

Jim Duncan — Thu, 15 Oct 2009 20:49:46 +0000

Mark –

I’d love to have the FairTax, but the politicians will *never* relinquish their power and control.

What about the home mortgage deduction?

The FairTax has positive effects on residential real estate far beyond this narrow question. Today’s homeowners, if they itemize (and 70 percent do not), pay their interest with post-Social Security/pre-income tax dollars. They then pay their principal with post-SS/post-income tax dollars. Those who do not itemize get no advantages at all. Under the FairTax, all homeowners make their entire house payment with pre-tax dollars.

With the FairTax, mortgage interest rates fall by about 25 percent (about 1.75 points) as bank overhead falls; this is a huge savings for consumers. For example, on a $150,000, thirty-year home mortgage at an interest rate of 7.00 percent, the monthly mortgage payment is $999.12 for principal and interest. On that same mortgage at a 5.25 percent interest rate, the monthly payment is $830.01. Over 30 years, the 1.75-percent decrease in interest rates in this instance results in a $60,879 cost savings to the consumer. Finally, first-time buyers save for that down payment much faster, as savings are not taxed.

Under the FairTax, home ownership is a possibility for many who have never had that option under the income tax system. Lower interest rates, the repeal of the income tax, the repeal of all payroll taxes, and the prebate mean that people have more money to spend and have an increased opportunity to become homeowners.

By: michael guthrie

michael guthrie — Thu, 15 Oct 2009 20:25:30 +0000

@ least the $8,000 tax credit is helping those who need it vs. the TARP money being used to bailout those who got us in this mess in the 1st place and who have now allegedly given bonuses = to the amount given to them by our government.
I would argue it is not just about the house purchase it is about the residual effect of household goods being bought like paint, carpeting, window treatments, etc. You are right that many of these buyers may have bought any way but the $8,000 was used to not only pay closing costs but to purchase appliances, tvs, etc that certainly have helped the retail economy

By: Mark

Mark — Thu, 15 Oct 2009 19:14:22 +0000

Jim – Would you do away with the mortgage interest deduction as well? That seems like a far bigger subsidy than a one time credit.