Tax credit may be expanded
All home buyers would be eligible
WASHINGTON - Lawmakers are trying to extend and expand an $8,000 federal tax credit for first-time home buyers, a stimulus-package tax break that many regard as a significant prop for the still-tottering economy.
The latest Senate proposal would drop the requirement that the credit be available only to first-time buyers, broadening the program but also adding to its cost, estimated by congressional analysts at $16.7 billion.
The backers of the idea, Georgia Republican Johnny Isakson and Christopher Dodd, a Connecticut Democrat who is chairman of the Senate’s banking committee, have suggested that their measure be attached to another pending bill aimed at throwing a lifeline to people hit by the recession - an extension of federal assistance to the millions in danger of exhausting unemployment insurance benefits.
While the White House says there will not be a second stimulus package following the $787 billion economy booster enacted last February, extending the home buyers’ credit and unemployment benefits are among several primary means being pushed by the administration or Congress to help people get through the prolonged economic downturn.
Others include continued subsidies for laid-off workers trying to keep their health insurance and a proposal by President Obama to provide seniors and others with a $250 payment to make up for the lack of a Social Security cost of living increase next year.
The stimulus-package credit allows first-time home buyers to reduce their federal income taxes by 10 percent of the price of a home, up to a maximum of $8,000. The credit, which could cost in the $12 billion to $15 billion range this year, is set to expire Dec. 1.
The Isakson-Dodd proposal would extend the credit to June 30, 2010. It would also remove the first-time home buyer requirement and raise the eligibility income limit to $150,000, or $300,000 for a couple. That’s double the current phase-out limits.
As with the Cash for Clunkers program for cars, skeptics have questioned whether the credit will have any long-term effect on the housing market.
Brookings Institution economist Ted Gayer wrote in a recent report that the tax credit is “very poorly targeted.’’ He calculated that of the 2 million or more people who would make use of the credit if it were extended for a year and expanded to cover all buyers, only about 383,000 would be additional sales motivated by the credit. He estimated the real cost of the credit would be about $40,000, rather than $8,000, per buyer.
But believers say it has been instrumental in sustaining an economic recovery highly dependent on housing.
Meanwhile, the San Antonio Express-News reported yesterday that the tax credit could be extended for another year for military personnel under proposals in the House and Senate.
The proposals have faced no opposition as lawmakers cite sacrifices made by members of the armed services.