Monday, Nov. 9
Posted 11 a.m. EST
Marketing is important, even on Capitol Hill. That's why we tend to see legislation with catchy, usually patriotic-sounding names, such as the American Working Families Tax Relief Act, or an easy-to-remember acronym, as in the HAPPY Act.
What we really need, however, is a bill that would require truth in naming for proposed legislation.
If such a rule had been in effect last week, instead of getting the Worker, Homeownership and Business Assistance Bill of 2009 as a new law, we would have watched enactment of the We Want to Keep Critical Re-election PAC Money Flowing Bill of 2009.
Not that I'm cynical or anything, but if you believe concern about house shoppers was the prime motivator in the passage of the law extending and expanding the first-time homebuyer tax credit, please call me. I have such a deal for you on a bridge to nowhere over some Florida swampland
Background counts: The biggest champion of extending and broadening the credit was Sen. Johnny Isakson, R-Ga. The Peach State lawmaker is not shy about touting his pre-election career:
Isakson spent more than three decades in the real estate business, beginning his business career in 1967 when he opened the first Cobb County, Ga., office of a small, family-owned real estate business, Northside Realty. Isakson later served as president of Northside for 20 years, presiding over the company's growth into the largest independent residential real estate brokerage company in the Southeast and one of the largest in America.
OK, everybody has to have a job. And there's nothing wrong with being a real estate broker. And the views of us all, including senators and representatives, are shaped by our experiences.
Who will benefit? But let's get real about legislation in general and the extension of the homebuyer credit in particular.
Yes, the tax break has helped some folks get into their first home. However, it’s the nation's home builders, real estate agents and their membership groups that were implicitly waving big political action committee checks in front of members of Congress who are the big winners.
I agree with critics of the extension who say that this law essentially will have the same effect on real estate as Cash for Clunkers did on car sales. It simply will shift homebuying, not increase it.
In fact, economists at Goldman Sachs say the law won't do much to reduce housing inventory. Rather, they contend it will primarily boost home prices over the next few months.
Hmm. Higher home prices. Let's see, that's not so good for folks looking to buy. It is, however, not a bad development for the homebuilding industry and the commission-earning realty folks who sell the properties.
More harm than help: And we can't overlook the possible reverse effects of this tax policy continuation.
"For the vast majority of cases, the homebuyer tax credit amounted to a free gift since it did not affect their decision to purchase a home," said Sen. Kit Bond, R-Mo., after the measure was passed. "And for the small minority of buyers whose decision was directly caused by the credit, this raises the question of whether we are subsidizing buyers who may not have been able to afford buying a home in the first place."
Bond's concerns already are coming true here in Central Texas. At a recent meeting of Enrolled Agents, an IRS representative who works with taxpayers who are facing financial hardship because of their tax obligations said that his office is dealing with a lot of people with problems created by home loans they probably shouldn't have received.
"We're still seeing people with low incomes getting loans for more homes than they can afford," says the representative from the Austin Taxpayer Advocate office. These new buyers, many probably inspired by the tax credit sales pitch, then filed amended returns to claim the tax break.
Now, just a few months later, they're already in foreclosure. Since foreclosure means they aren't going to live in the homes for the requisite three years, they now are facing paying the credit back.
Yikes! Isn't this exactly what got us into our economic straits in the first place?
Such possibilities, however, often are ignored in the heat of passing such important laws like the We Want to Keep Critical Re-election PAC Money Flowing Bill of 2009.
What's in 'em: Just in case you were wondering about those two bills I mentioned at the beginning of this blog item, here's the scoop.
The full name of the HAPPY Act of 2009, H.R. 3501, is the Humanity and Pets Partnered Through the Years Act. It would allow a tax deduction for pet care expenses.
The HAPPY Act is proof as far as I'm concerned that lawmakers, or at least their staffers, come up with the acronym first and then work backward for a name that fits!
The American Working Families Tax Relief Act of 2009, H.R. 1805, wants to permanently extend tax deductions for state and local sales taxes, for qualified tuition and related expenses and for private mortgage interest premiums.
Oh yeah, the bill also would "modify the homebuyer credit," but we don't have to worry about that any more.