More on the New Home Buyer’s Tax Credit Bill/ Currently on the Senate Floor…

Here is the Wall Street Journal follow-up article related to the post we had written and hoisted up on Wednesday.

For Wednesday’s post, click here…
For the full article we are commenting on today, posted on the WSJ Developements Blog, click here…

An excerpt from the aritcle at hand…

“Sen. Johnny Isakson has reintroduced a bill that would give home buyers a tax credit worth 10% of the purchase price of a home up to $15,000. The Georgia Republican unsuccessfully tried to get the credit inserted into the $787 billion stimulus package that went into law in February. Congress instead opted for extending and boosting an existing credit, worth up to $8,000, for first-time buyers. That credit is set to expire Dec. 1.

The proposed credit wouldn’t have income restrictions, unlike the current one, which phases out for individuals making more than $75,000 and couples making more than $150,000.

The legislation already has co-sponsors from both parties, including Senate Banking Committee Chair Christopher Dodd, a Connecticut Democrat. In February, congressional budget estimates figured that the $8,000 credit for first-time buyers would cost between $2 and $3 billion, while the $15,000 credit would cost an additional $35.5 billion.

That’s a big hurdle for the bill. Lawmakers would have to justify a considerably larger subsidy for more affluent homebuyers.”

Response…

The removal of toxic mortgage paper (ie: home sales of distressed homeownship situations and the unloading of recouped property assets) from our banking institutions is THE key to unlocking their liquidity, credit confidence, and greed in the form of slightly looser loan qualifying requirements, which would further accelerate the home purchase necessity.

A little recap here if I may… an $8,000 tax credit projected at a tax revenue cost of 2-3 billion has equated to some, if little improvement to home sales. On the other hand, a $15,000 tax credit with no income cap, made available to all home buyers, not just first-timers, has a projected tax revenue cost of 35.5 billion. The amount of proposed tax credit would basically double to $15,000, and in turn so should the tax revenue cost. But it doesn’t! Congress’s own budget estimate for the new proposal projects home purchases to rise almost 6 times the current rate of consumption with those purchases involving the tax credit!

Here’s the math… $3 billion in tax revenue loss doubled to 6 billion, divided by 35.5 billion in projected tax revenue loss for the proposed bill, equals 5.91 times more use of the new tax credit bill, then the current rate of home purchasing being transacted with the existing tax credit as it sits.  

Yes, this bill would be a big hurdle for a Democratic majority whose sole consideration is funding  for their social programs, as opposed to a real solutions for real economic problems, per their own estimates and projections.