When does the idiocy end?
[i]The legislation also would extend the $8,000 homebuyer tax credit to contracts signed by April 30 and closed by June 30. The controversial credit, which many say has boosted home sales in recent months, was set to expire after Nov. 30.
The bill also creates a $6,500 credit for those who buy a home after living in their current house at least five years. That measure would apply to contracts signed by April 30 and closed by June 30. The current credit defines a first-time homebuyer as someone who has not owned a residence within the past three years.
The credit would be available only for the purchase of principal residences priced at $800,000 or less.
The bill would raise the adjusted gross income cap to $125,000 for single filers and $225,000 for joint filers. The amount of the credit currently begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers.
“It’s gonna put people back to work, the home builders, put people in the real estate business,” said Sen. Chris Dodd, D-Conn. “The kind of jobs that can make a difference.”
The extension will cost $10.8 billion over 10 years, according to the Joint Committee on Taxation.
Through mid-September, 1.4 million tax returns had qualified for the credit, according to the IRS. Some portion of those returns, which the IRS couldn’t specify, represents buyers who took advantage of an earlier version of the tax credit, which was only worth $7,500 and has to be repaid over time.
By the end of November, the credit will have been used by 1.8 million homebuyers, at least 355,000 of whom would not have bought a house without the tax break, according to estimates by the National Association of Realtors.
“The data on the present home buyer tax credit show that the credit has had its intended impact – sales have jumped in recent months to a projected 5.1 million for the year and housing inventory has been trimmed, thus stabilizing home prices noticeably,” said Ron Phipps, the association’s first vice president, in Senate testimony last month.
The credit, however, has also posed many problems. Critics say it’s a waste of money because most of those claiming the credit would have bought homes anyway.
It’s also been the target of fraud. Some 74,000 people claimed more than $500 million in credits even though they may not be first-time homeowners, according to Treasury officials. And more than 580 children, including some as young as 4-years-old, have claimed the credit.
“Some key controls were missing to prevent an individual from erroneously or fraudulently claiming the credit and receiving an erroneous refund of up to $8,000,” said J. Russell George, Treasury inspector general for tax administration, before a House subcommittee last month.
[/i]
There are so many things wrong with this I don’t even know where to begin. First we have the original $8000 credit that has now been extended. Much like cash for clunkers, this has done little to stimulate sales. The article claims 1.8 million have claimed the credit, but only 355,000 have bought homes because of the credit. At least it hasn’t stimulated enough sales to create another bubble, but it has cost taxpayers about $40,000 per home sold because of the program. And now we’ve decided to extend it. I would really like someone to explain to me the benefits of these arbitrary tax cuts for select groups, many of which don’t pay taxes in the first place, or have for a very short period of time.
Now we decide to give a $6500 for all home purchases. Unfortunately, we have decided to again arbitrarily cut out anyone from this program that has not lived in their current home for 5 years. What happens to the guy that did everything right, but unfortunately bought just before the market collapsed? I’m talking about someone who bought a home in a reasonable market with a reasonable downpayment that was well within their means that is now excluded from this credit. What is the logical reason to exclude them?
Unfortunately, if this $6500 credit does have any impact it will be a negative one. Just like the first-time homebuyer credit, very few will buy exclusively because of the credit.
For 99% of those affected by this they will have to sell their current home in order to purchase a new one and get the credit. Our legislators seem to have forgotten that many people have put off selling the last couple of years because of the already high supply of homes. What we will find is that these people now have an incentive to sell and will gladly take $6500 less for their home than they otherwise would have in order to move and buy a new home. We also have those that are currently trying to sell and move. They will have just as much of an incentive to take $6500 less. Guess what happens after all this? Everbody’s home value falls by $6500, hooray! (Except of course in the eyes of our county appraisers, I’m sure they’ll just ignore any impact this has. Got to keep those county assesments up or the poor children won’t be able to get to school.)