In which I take a stand against the first-time home buyer tax credit
I have a story up on Time.com about why I don't think the $8,000 first-time home buyer tax credit should be extended. I was asked to write the story as an opinion piece, which is why it reads like an opinion piece—even though the headline might lead you to believe you'll be getting some good old-fashioned on-the-one-hand/on-the-other-hand journalism.
You can read the full piece here, but basically my argument boils down to three things: 1) We're past the point of economic crisis control; 2) There are likely unsavory political motives around the push to extend the credit; 3) The tax credit cost a lot of money for not all that much pay-off; 4) The longer we pay people to buy houses, the less chance there is of ever taking such a program away.
In doing my research, I came across this Roger Lowenstein article from 2006. In it, he explains the history—and illogic—of another way we try to get people to buy houses: the mortgage-interest tax deduction. It's pretty fantastic. I highly suggest reading it.
Barbara!
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You've probably seen this already, but Michael Moore, in an interview with Roger Ebert, offers advice on how to fight foreclosure: ask the bank to prove their ownership by producing a copy of the mortgage.
http://rogerebert.suntimes.com/apps/pbcs.dll/article?AID=/20090927/PEOPLE/909279997
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Barbara,
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The problem with what you are advocating for is that it essentially argues against a rather modest fix to an inherent and intractable evil.
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You see, Lowenstein, recognizes rather eloquently that the tax deduction benefits guys with more wealth like me. For the folks on the lower end of the wealth spectrum, not so much.
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The first-time credit has a cap on its benefit which I would have been unable to qualify even if I was buying my first home. While it is a small measure, it essentially brings back into parity a system which on the whole is severely regressive. This is precisely the thing that European governments have been seeking to bring into balance to avoid severe income disparity which ultimately brings about severe market dislocations.
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I suggest you re-examine your premise. Or at the very least, acknowledge that removing the tax deduction with only the wealthiest able to continue donating to politicians is political suicide. And even at $79 billion in costs....it is pennies compared to our real problems in 1) health care and 2) social security with the growing number of early retirees - which, frankly, I'm surprise almost every economist should have seen coming (no jobs - hmmm, how about free money?
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On the other hand, Bryan, the problem with your logic is that almost over a third of homeowners own their house outright, and get no benefit from the mortgage interest tax deduction. They are also likely to overwhelmingly be the wealthier homeowners (I have no mortgage, but I claim modest living rather than wealth). So the deduction really benefits those who are wealthy and buy too much house. Oh, and the real estate agent who sells it to them.
Rather than regressive, the deduction specifically encourages spending behavior in any economic stratus. And if you look at many of our tax regulations, well, that's exactly what they do. That's perhaps why we should tear down the current system and go with a VAT. Yes, never happen, I know.
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[...] Home Buyer Tax Credit: Barbara Kiviat of Time argues against the home buyer tax credit in a new column. “My argument boils down to three things: 1) We’re past the point of economic crisis control; 2) There are likely unsavory political motives around the push to extend the credit; 3) The tax credit cost a lot of money for not all that much pay-off; 4) The longer we pay people to buy houses, the less chance there is of ever taking such a program away. [...]
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[...] Home Buyer Tax Credit: Barbara Kiviat of Time argues against the home buyer tax credit in a new column. “My argument boils down to three things: 1) We’re past the point of economic crisis control; 2) There are likely unsavory political motives around the push to extend the credit; 3) The tax credit cost a lot of money for not all that much pay-off; 4) The longer we pay people to buy houses, the less chance there is of ever taking such a program away. [...]
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