If critics think the credit is so supportive, what are the chances that the credit becomes not only permanant, but as untouchable as the mortgage interest deduction?
Congress is considering proposals to greatly expand a soon-to-expire $8,000 tax credit for first-time homebuyers — potentially applying it to all but the wealthiest homebuyers.
Supporters say doing so would further boost home sales, stabilize housing prices and generate jobs. Opponents say extending and expanding the credit would be a waste of money and only temporarily stave off further price declines.
The credit now can be claimed by anyone buying a home who has not owned one for three years and who closes the deal by Nov. 30.
Beyond extending that deadline, some lawmakers want to make the credit available to all homebuyers who meet income eligibility requirements. And some want to increase the amount of the credit from $8,000 to $15,000.
Opponents of extending and expanding the credit worry that such moves offer poor bang for the buck and won’t stem housing declines.
“Everything spent on this program will ultimately have to be paid for later through higher, economically harmful taxes,” Ted Gayer, co-director of economic studies at the Brookings Institution, wrote in a Brookings blog.
Assuming there are 5.5 million home sales in 2010, Gayer said, expanding the credit to all homeowners “is poorly targeted because it would give a credit to 5.5 million homebuyers who would have bought a home anyway.”
The current credit was estimated to cost federal coffers $6.64 billion over 10 years. But Gayer notes that the cost is likely to be much higher since more people than expected took advantage of it but only about 15% of people wouldn’t have bought a house otherwise.