Last week Senator Johnny Isakson introduced legislation that would extend a $15,000 tax credit to any and all home buyers. And I do mean any and all. The current maximum tax credit for home buyers is limited to $8,000 for first-timers with adjusted gross income below $75,000 ($150,000 for joint filers). The Republican senator from Georgia -- who made his fortune as a real estate broker, I should point out -- wants to swing Treasury’s doors wide open. His bill nearly doubles the maximum credit, doesn’t have an income cutoff and isn’t limited to making home-buying more affordable for first-timers.
"The first-time home buyer tax credit has made a difference," said Isakson when announcing the bill. "First-time home buyers used it and the market stabilized, but we don't have a recession in first-time home buyers. We have a recession in the move-up market.” Continued the senator, “One of the biggest problems facing the American people today is an illiquid housing market, a decline in their equity, a decline in their net worth and a depression in the housing market that we are obligated to correct if we possibly can."
There’s just one big catch. If this legislation passed it would be at an estimated cost of more than $35 billion for taxpayers. Maybe that’s just a rounding error in a world of trillion-dollar deficits and $700-billion-plus stimulus deals, but geez, it’s still $35 billion of taxpayer money. And it’s not about helping folks facing foreclosure or exploding mortgage rates. If this ever became law it would be a boon to the well-off that can already afford to trade up. The only way you can make a move today is if you are sitting on a wad of home equity or a nice stash of cash: You need something to come up with a down payment to satisfy tighter lending standards. You can’t use a credit for a down payment (HUD backed away from that notion a few weeks ago.) So the big winners under Isakson’s bill would be folks who are already in good enough shape to be able to trade up anyway.
A similar provision spearheaded by Isakson made it through a Senate vote back in February, but it was one of the casualties left on the cutting room floor when Congress had to trim the stimulus package to its final $787 billion price tag. Given the steep cost of Isakson's bill it is unlikely to be fast-tracked anytime soon, but you have to give the former real estate broker chutzpah points for trying it again.