About that Isakson amendment for a $15,000 tax credit for a home purchase...

[flpoljunkie]

More Generous to Wealthier Families Is Not the Same as More Generous

The NYT refers to the Isakson amendment that would allow a tax credit for a home purchase of 10 percent of the purchase price or $15,000 (whichever is less) as "more generous" than the current credit of $7,500 for first time homebuyers.

The Isakson amendment will actually not be more generous to many homebuyers. Unlike the current credit, it is not refundable. This means that a family with little income tax liability, who could have received the full $7,500 under current law, may only be eligible for a small credit under the Isakson amendment.

The article also describes this as a proposal to stabilize house prices. It is not clear that this is the intent. The existing law provides a credit to new home buyers, who are a net addition to demand in the market. This credit would go to any homebuyer, the vast majority of whom will be people who already own a home. If a person buys a home, but sells their current home, it has no net effect on the market.

--Dean Baker

Posted by Dean Baker on February 8, 2009

http://prospect.org/csnc/blogs/beat_the_press_archive?month=02&year=2009&base_name=more_generous_to_wealthier_fam

[Thrill]

1. I saw that when it was passed. I don't think thats going to stay in there

[Dawgs]

2. It was always a bad idea.

A refinancing program was the amendment that should have been added.

[customerserviceguy]

3. Ah, but it has one effect on the market

It generates commissions for real estate agents, and everybody else with their hand out at closing time. Clearly, those are the folks being looked out for in the Isakson amendment.

I've not been able to find an actual copy of the Isakson amendment to look through, but I've seen enough descriptions of what's in it on financial websites to cause me to strongly suspect that it will be the vehicle for large amounts of potentially fraudulent activity. I used to be enrolled to practice before the IRS back in the 1980's, and I know that if I were still in that field, I'd be thinking up all kinds of clever schemes to lop $15K off the taxes of my clients.

Artificially stimulating the residential real estate market with tax gimmicks, anywhere from the hallowed mortgage interest deduction, to the tax-free status of profit on a principle residence, has been a big part of the hot air that blew up the housing bubble. We can slap a band-aid over the hole in the bubble, and resume pumping the bubble back up again at the expense of other things, or we can just let the bubble continue to deflate to rational, reasonable levels.

When the average house in an area is more than three times the annual earnings of the average family in that area, the bubble's still got way too much air in it.

[flpoljunkie]

4. Exactly! Isakson is a former real estate broker. Great post!

[GreenPartyVoter]

8. Avg house here costs 8 to 10 times what my husband makes, so the $15k thing

never really changed our minds about trying to buy a home.

[Barack_America]

5. Well that sucks. nt

[sandnsea]

6. We're giving up teachers and green technology

for more tax cuts for the wealthy.

[flpoljunkie]

7. Cynical, hypocritical R's are weakening the stimulus, banking on its failure for the 2010 midterms.

Shame on them!

[sandnsea]

9. No, they really believe this

Richard Steele really believes it when he says government jobs aren't real jobs because they aren't in the private sector.

Sadly, they're too stupid to understand that if you spend money in new technologies in the government sector, it stabilizes those industries until the consumer catches up. And if you construct something in the government sector, it keeps a contractor from going under. And that teachers, cops, firefighters, librarians, park rangers, etc etc are real jobs that people really value.

[flpoljunkie]

10. Michael Steele is an idiot.