No One Likes the Homebuyer Tax Credit
It's tax policy time! The Homebuyer Tax Credit (official site here here) gives $8,000 of taxpayers' money to people buying new homes. It was about...
It's tax policy time! The Homebuyer Tax Credit (official site here here) gives $8,000 of taxpayers' money to people buying new homes. It was about to expire, but Congress just signed off on an extension through April. Everyone seems to think this was a big mistake.Ezra Klein (speaking in the third person) says it's pointless because most people who are buying homes aren't moved to do it by a paltry $8,000:Like a lot of renters, Klein took a look at the housing market this year and decided it was a good time to move from renting to owning. A few weeks ago, he closed on a new home. As a reward, taxpayers are going to give him $8,000. That's good for Klein, but the tax credit had nothing to do with his decision to purchase a new house. Taxpayers just wasted $8,000 trying to convince Klein to do something he was going to do anyway.The Washington Post's business columnist Steven Pearlstein says it won't help anyone who actually needs it:This $10 billion boondoggle is nothing more than a giveaway to the real estate industrial complex and people who could afford to buy a new home anyway. ... This is one of those strategies that are as nonsensical in theory as they are in practice: trying to put a floor under declining home prices by making houses more affordable. To the degree that it works, the benefits will inevitably wind up in hands of the sellers -- but not the buyers -- and not before the agents, appraisers, lenders, brokers and insurers have taken their cut.And the Harvard economist Ed Glaeser follows up with the kicker:
But the real problem with the credit is that it continues the long-standing federal push toward far-flung McMansions and away from dense, apartment living. ... This pro-suburb, pro-big home policy push helps keep America's households consuming plenty of energy, both inside the home and in the car. On average, as density doubles, household gasoline consumption falls by about 110 gallons per year. When a household moves from living 2 miles away from a city center to 10 miles away, gasoline consumption increases by more than 100 gallons annually. Smart environmentalism should push against tax policies that encourage more suburban sprawl.
I'm convinced. Is there anyone out there defending the decision to extend the tax credit at all? If not, how did this get passed? Was it just building industry lobbying or total desperation about the economy in Congress or what?