Home Builders Lobby Now Targeting Michigan Legislature for More Tax Handouts

This blog has long documented the pathetic (as measured by truthful substance) campaigns put forth by the National Association of Home Builders and the National Association of Realtors when it comes to federal tax policy. Now they are at work at the state government level. And where else would you expect a state to approve more bad tax policy than Michigan? This morning’s Tax Analysts reports that both Republicans and Democrats are seeking to provide relief from the “pop-up tax” as the article calls it. Here’s more:

Michigan home builders are working to promote a package of bills that would offer some tax incentives in an effort to revive the sluggish industry.

Builders from around the state rallied at the state capitol on May 20 to encourage lawmakers to revisit the package, called Stand Up for Housing: Foundation for Recovery.

The Republican Senate in March passed a bill (SB 1247) that would give home buyers tax credits to offset the tax increases that typically occur when homes are sold and reassessed. Under the bill, home buyers could avoid the so-called pop-up tax by purchasing a house to be used as a primary residence between April of this year and January 1, 2011.

Lawmakers are expected to try to reconcile the bills into final legislation over the next several weeks. Compromises could include offering deferred property taxes on unsold construction, a moratorium on the pop-up tax, income tax credits for energy-efficient home improvements, and prorated homestead property taxes.

So here’s the deal. Property taxes on existing homes that have not been sold in some time are too low and not assessed at their full market value. So what’s wrong with that according to the Home Builders? The fact that when sold, the house is temporarily taxed at its actual market value in the first year (and then receives favorable treatment thereafter). This is nonsense. The problem stems from the fact that different housing is treated differently based upon how long the current owner has owned the property. That should be fixed, but not in the way the Home Builders want. Because while this would cut property tax bills, local governments will then look to Lansing for more money, meaning you can expect higher sales, income, or corporate income taxes in Michigan. (Like that would surprise anyone?)

And if this is good tax policy according to the Home Builders, why should it only be temporary?

Also income tax credits for energy-efficient home improvements are ridiculous, especially at the state level. If policymakers are serious about the environment, they should call on the federal government to impose a national cap-and-trade system or a national carbon tax as opposed to subsidized products hand-picked by politicians.