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
Jim – Would you do away with the mortgage interest deduction as well? That seems like a far bigger subsidy than a one time credit.
@ 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
I’d love to have the FairTax, but the politicians will *never* relinquish their power and control.
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.”
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.
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.
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.
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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
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.
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