Politics

Stimulus Home-Buying Break Flunks Fairness Test

Congress has stirred up a hornet's nest with a minor provision tucked away in the massive economic stimulus package that's on track to be passed this month.

Congress has stirred up a hornet's nest with a minor provision tucked away in the massive economic stimulus package that's on track to be passed this month. The provision seems simple enough: Take a law passed last year that provides a tax credit of up to $7,500 to first-time home buyers and strip out the part that says the credit must be paid back to the federal government over 15 years. Without the easing, the "credit" is essentially a no-interest federal loan. Thus the juicier credit would theoretically spur even more first-time home purchases.

Problem is, the home buyer credit applies to purchases after April 8, 2008, and before July 1, 2009, while the easing was written to cover only folks who bought a home during the first six months of this year. So under the proposal in the stimulus package, if you purchased your home before Jan. 1, you still have to pay back the credit. Score one for the procrastinators.

Needless to say, folks who acted last year to take advantge of the home buyer credit are pretty upset about the double standard. They're raising a hue and cry that Congress changed the rules in the middle of the game. Why would lawmakers make such an obvious political blunder? It isn't hard to figure out what happened. The point of an economic stimulus package is to spur future economic activity. If what you're trying to do is get more people to buy homes, it doesn't make sense from an economic standpoint to extend the incentive to folks who already made a purchase.

But fairness has to enter the equation, too. Easing the credit just months after creating it is tantamount to saying that it didn't have enough oomph in the first place and should never have included the repayment requirement. If Congress believes the credit needs to be heftier, then shouldn't everyone who qualifies for the credit get it on the same terms? If folks who bought last year put up a big enough stink, it's possible lawmakers will take a second look, but so far they haven't given any indication they're listening to the complaints. Instead they're talking about juicing up the credit in ways that might make recent buyers even madder: Removing the $7,500 maximum and opening up the credit to folks who aren't first-time buyers.

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
The 12 Best Tech Stocks to Buy for 2022
tech stocks

The 12 Best Tech Stocks to Buy for 2022

The best tech-sector picks for the year to come include plays on some of the most exciting emergent technologies, as well as several old-guard mega-ca…
January 3, 2022
How to Know When You Can Retire
retirement

How to Know When You Can Retire

You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually …
January 5, 2022

Recommended

Most-Overlooked Tax Deductions and Credits for the Self-Employed
Tax Breaks

Most-Overlooked Tax Deductions and Credits for the Self-Employed

If you've recently gone into business for yourself, see how the tax laws can work for you.
December 21, 2021
The Biden Tax Plan: How the Build Back Better Act Could Affect Your Tax Bill
Politics

The Biden Tax Plan: How the Build Back Better Act Could Affect Your Tax Bill

Depending on your income, the Build Back Better Act recently passed by the House could boost or cut your future tax bills.
November 22, 2021
Business Cost Outlooks for 2022: Eight Key Sectors
Economic Forecasts

Business Cost Outlooks for 2022: Eight Key Sectors

What’s in store for all sorts of business costs in 2022?
October 12, 2021
The Most Expensive Natural Disasters in U.S. History
Economic Forecasts

The Most Expensive Natural Disasters in U.S. History

Wind, water, fire and drought have all wreaked havoc on the United States. What’s been the worst?
July 1, 2021