President Obama just announced at a press conference that he has directed Treasury Secretary Jack Lew to demand the resignation of the Acting IRS Commissioner, Steven Miller. CNN then obtained Miller's resignation letter...
- The Tax Policy Blog
- TF Weighs In: End the First-Time buyer Credit
TF Weighs In: End the First-Time Homebuyer Credit
We posted the following in response to this Wall Street Journal blog post regarding the possible extension and expansion of the first-time homebuyer tax credit:
The first-time home buyer credit should absolutely not be extended. Owning a home is part of the American dream, but the government's obsession with subsidizing homeownership seems more like a nightmare. Homeowners are already heavily subsidized at the expense of other taxpayers through tax provisions such as the mortgage interest deduction, the deduction for state and local property taxes, and the non-taxation of imputed rental income.
According to a 2005 study by the Congressional Budget Office, the effective tax rate on tenant-occupied housing is 18.2 percent, while the rate on owner-occupied housing is negative 5.1 percent, a difference of over 23 percentage points. Homeowners are showered with subsidies while renters (and other taxpayers) pick up the check.
This over subsidization of home ownership encourages too much investment in housing and too little investment in other sectors. It also encourages people to purchase homes who otherwise would not and probably should not. The housing bubble's growth - helped along by government pressure to loosen lending standards on federally backed loans - and subsequent collapse should have opened our eyes to the dangers of too many unqualified buyers owning homes.
Those considering buying a home should make that decision based on what makes the most financial sense for them in the long-term, not how much the government is willing to pay them to buy a home right now.
For more on the home buyer credit see Tax Foundation chief economist Patrick Fleenor's recent op-ed.
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The Tax Policy Blog is the official weblog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.