Tax Credit for First Time Home Buyers

Tax Credit for First Time Home Buyers

Today congressmen are questioning whether or not to extend the tax credit for first time home buyers. Due to the recent recession in our economy, congress established this bill to give a tax credit to new home buyers on a descending scale based upon one's salary in hopes that more houses would be bought, gradually stimulating the housing market and our economy as a whole.

The tax credit for first time home buyers was established January 1, 2009 and is set to continue through December 1, 2010; however, right now congress is deliberating on whether they should extend this bill until June of next year or until the end of 2010, or not at all. At this moment congressmen are debating on whether it is in the best interest of the economy and society as a whole to extend this bill for additional days. Currently, this tax credit gives an average of $8,000 to new home buyers depending on their salary and the fact that they have not owned a home in the past three years and that they close on the purchase by November 30, 2009. "By the end of November according to estimates by the National Association of Realtors, the credit will have been used by 1.8 million homebuyers, at least 355,000 of whom would not have bought a house without the tax break." This shows that the bill is having a significant positive impact on house buyers.

Mark Zandi, chief economist of MoodysEconomy.com, supports extending the bill regardless of income, except that of the richest end of the economy, believing that the cost wouldn't exceed $30 billion over the next ten years. Mr. Zandi believes the government should put aside a set amount of money for the tax credit for first time home buyers on a first come first serve basis until June of 2010 when, hopefully, the housing market will stabilize. According to Rosen's testimony before congress he claims that, like the expansion in the lower end of the market, we could expect to see a 'trade-up market' to purchase more expensive homes if we broaden the range of the tax credit to wealthier ends of the economy ultimately helping the entire population. By stimulating the lower end of the economy it will have a ripple effect creating new jobs, as estimated by NAHB Chairman Joe Robson of "nearly 350,000 jobs over the coming year" and therefore a more stable and profitable economy for all.

On the other end, economists like Ted Gayer, co-director of economic studies at the Brookings Institution, believe this is a waste of tax payers money, concluding it will all have to be paid back eventually through higher economical taxes. Ted Gayer claims that the tax is too broad, effecting home buyers that would have bought a house whether or not this bill was in place. By extending the bill to June, it would increase the federal government's cost to $16.7 billion dollars far exceeding the initial