Senate Doubles Tax Credit in Stimulus

Written by: Steve Cook   Wed, April 29, 2009 Crisis Watch

With its back against the goal line and the fourth quarter clock ticking down, the housing industry broke off a big touchdown run, but missed the field goal that would have given it the lead in the struggle for stimulus funds. However, the titanic and critical contest over how to jump start the housing markets is still up in the air, and will end in the next week or two as pressure to act becomes overwhelming.
Today the Senate is scheduled to vote on final passage of the stimulus bill, after a last minute compromise between the Obama Administration
and moderate Republicans removed $100 billion from the bill.
Housing was in serious shape in the stimulus package coming

out of the House of Representatives a week ago. The housing lobby’s primary achievement was a six month extension of the existing $7,500 first-time home buyer tax credit and removal of the requirement that first-time home buyers repay the credit over 15 years. Even a housing lobbyist admitted the bill was not as heavily housing-focused as expected.

But as Republican pressure mounted in the Senate to substitute tax reductions for expenditures, on Wednesday Senator Jonny Isakson (R-GA), a former Realtor, succeeded in attaching an amendment that would double the size of the tax credit, make it available to all principle residence purchasers, not just first-time buyers, and allow taxpayers to claim the credit on their 2008 income tax returns.
The amount of the tax credit would be $15,000 or 10 percent of the purchase price, whichever is less. Purchases must be made within one year of the legislation’s enactment, and the tax credit would not have to be repaid.

The amendment also seeks to prevent misuse by only allowing purchases of a principle residence and by recapturing the credit if the home is sold within two years of purchase. The amendment would sunset the current $7,500 housing tax credit on the date of enactment.
In arguing for his expanded credit, Isakson said he modeled
the idea on a $2,000 new home tax credit enacted in the mid-1970s when America faced a similar housing crisis. He said the credit helped home values to stabilize, as housing inventory fell and the market recovered.

Like football fans in a stadium, real estate blogs across the nation erupted with glee. Flush with success, they emailed their Senators.urging them to go all the way for victory by passing an amendment that would use Federal
funds to buy down mortgages to 4.5 percent or less for anyone purchasing a primary residence.

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