Tax Credits by Sens. Isakson and Stabenow Incorporated into Larger Subsidy Bill
Faced with a choice between two bad new housing credits proposed by Sens. Johnny Isakson (R-GA) and Debbie Stabenow (D-MI), the Senate merged the two and added several more unwise housing tax incentives.
"The bill of housing incentives going to the floor of the Senate today is a panicky effort to artificially keep the housing bubble from popping," commented Gerald Prante, senior economist at the Tax Foundation. "Would it have been wise in 2001 for the government to have given tech stock investors a huge tax credit for having bought overvalued stock during that bubble?"
Prante is author of the recent study analyzing the Isakson and Stabenow credits, Tax Foundation Fiscal Fact, No. 122, "More Bad Ideas for Housing Tax Credits" available at
www.taxfoundation.org/publications/show/23073.html.
Sen. Isakson had proposed a $5,000 tax credit that could be claimed for three years by buyers of homes that are vacant, occupied but in default, or foreclosed on. Sen. Stabenow had proposed a refundable, one-year credit of $6,000 ($3,000 for singles) for first-time homebuyers. The bill sent to the floor includes a $7,000 one-year credit for buyers of homes in foreclosure. On top of that provision, the Senate has added a "standard property tax deduction" of $1,000 for couples or $500 for singles.
"The regular standard deduction currently claimed by non-itemizers is already designed to include a property tax deduction," pointed out Prante. "If Congress wants to raise the standard deduction, they should just do that for everyone. They're acting as if renters are living on Easy Street."
On the corporate side, the Senate is determined to help "struggling home builders" by letting them retroactively deduct their current losses against the stellar profits they made during the housing bubble. The federal tax code already funnels more than $100 billion dollars annually into the housing sector, nearly 10 percent of total federal income tax collections.
"It would go too far to blame the current housing crisis on existing tax subsidies, or to predict that enacting more will cause another one, but using the tax code to subsidize housing hasn't worked to the nation's benefit, and it never can," said Prante.
Deficit concerns are getting short shrift in the debate.
"Someone has to pay for these massive giveaways," said Prante.
http://www.taxfoundation.org/news/show/23078.html 
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