First time homebuyers are eligible for an $8,000 tax credit thanks to the multibillion dollar stimulus package Congress passed this year. Where “cash for clunkers” aimed to give the auto industry a lifeline, the homebuyer tax credit hopes to boost sales of homes. But would it really work?
If you ask politicians from states suffering the most in real estate, the answer is yes:
“It’s working,” says Rep. Dina Titus, the 3rd District Democrat. “You can see the positive impact of it. It really is stimulating the economy, helping Realtors and developers and homebuilders and individual homebuyers.”
Of course, that’s easy for a Democrat in Congress to say. Democrats even hailed the “cash for clunkers” program a success, even though the program only created a temporary spike in demand of new fuel efficient cars, and that’s even for mostly foreign models. Economists from both sides aren’t so fond of the idea:
“It’s terrible policy,” says Mark Calabria of the libertarian Cato Institute.
“It’s awful policy,” says Andrew Jakabovics, associate director for housing and economics at the liberal Center for American Progress. “It’s incredibly expensive. It’s not well targeted.”
Home sales have risen dramatically in the past year, but most economists don’t attribute the increase to the tax credit. August single-family-home sales in Southern Nevada, for instance, hit 3,229, up more than 25 percent from a year earlier.
But economists attribute most of the rising sales to the plunge in prices, not the tax credit. The median sale price of single-family homes was off more than 35 percent from a year earlier.
Tax credits are Democrats’ favorite way to make you think you’re getting a good deal at buying something. The homebuyer tax credit was buried inside the massive stimulus package, so one way or another we’re going to pay for it anyway. It’s silly to think that people will flock to buy houses just to receive $8,000 that they never see.
With sky high unemployment rates and a forecast of more job cuts from companies, the best remedy may not be tax credits, but rather tax cuts across the board. That’s real money people can keep.
