If you listen to the real estate community, the $8,000 tax credit is necessary for getting the market though a tough patch and one of the more successful programs of the Federal Government. But Martha White of The Big Money has a contrarian point of view. She thinks we should kill the tax credit.
That’s not the only problem. The credit also artificially inflates the value of eligible homes sold by up to $8,000, leaving the buyer with a debt that’s greater than the value of the property. Sound familiar? Inflated home values were a big part of what got us into this mess in the first place. Perpetuating this via the tax credit might lessen the pain in the near term, but as we’ve all learned the hard way, a correction’s going to come sooner or later.
What’s more, the credit creates skewed incentives. America’s tax code is tilted heavily in favor of home ownership; if you own your house, you get to deduct the interest you pay on your mortgage as well as the property taxes. Plus, the more house you own, the more you can deduct. Some economists think this encourages buyers to stretch for a McMansion instead of buying a more modest abode; following this logic, dropping the income cap and first-time requirement on the tax credit would only increase that effect. via the Washington Post.
The reality is that Washington lawmakers hate getting rid of legislation that makes them popular. And this tax credit is popular with both the population at large and special interest groups. While I do not expect it to be kept forever, it would greatly surprise me if it is not kept alive for a few more years.
No comments:
Post a Comment