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When Offered, People Take Tax Credits

2 min readBy: Justin Higginbottom

The New York Times is reporting the Home Buyer Tax CreditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. a “success”, whereby success means that a lot of people have taken free money. Broaden the definition to mean increasing the number of first first-time homebuyers and the program doesn’t seem so stellar:

Though the Treasury Department and the real estate industry have termed the program a success, helping 1.8 million people buy homes, many taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. policy experts say it has been singularly cost-ineffective: most of the $12.6 billion in credits through end of February was collected by people who would have bought homes anyway or who in some cases were not even eligible.

But this lack of success might not be such a bad thing. Should the government be luring more people into homeownership? America should be a country of responsible investors before home-owners. Last year senior economist Patrick Fleenor wrote in an op-ed on why home buyer tax credits are bad policy:

The way out of the housing mess is not billions more in subsidies. It’s dismantling the existing ones so that individuals can decide for themselves how to best attain shelter.

Doing so would protect taxpayers from the poor decisions of others and give the economy a much needed boost by steering investment away from the construction of McMansions and into those things that raise workers’ wages like modern factories equipped with high-tech machines.