A war is being waged over the $8,000 first time home buyer tax credit, and it doesn’t look good at the moment for a tax credit extension or expansion - although no one has given up the fight.
In Sen. Johnny Isakson’s (R-Ga.) camp, you have those who not only want to extend the $8,000 tax credit through June 2010, but expand it to include all home buyers who earn less than $150,000 if single, and less than $300,000 if married, filing jointly.
But many other Congressional leaders don’t think there should be any expansion of the tax credit. Senate Majority Leader Harry Reid (D-Nev.) proposed a plan that would extend the current $8,000 first time tax credit through April 2010. The tax credit would diminish by $2,000 per quarter until it disappears entirely at the end of 2010.
Currently about 1.5 million Americans have filed for the $8,000 first time home buyer tax credit. The IRS says a significant portion may be fraud. The tax credit is estimated to have cost the U.S. government approximately $10 billion so far. The White House has made it clear that while it might support extending the deadline for the $8,000 tax credit, it wants it to stay focused on first time buyers.
While Realtors, mortgage lenders and home builders are hot to see the credit extended and expanded, it seems that Congress just doesn’t have the stomach to add another $17 billion to the trillions the government has spent on fixing the economy.
From my point of view, it’s a no-win situation. If the tax credit is extended, it sends a signal that the housing market is in such poor shape that it can’t manage without another lifeline being extended. If you allow the tax credit to expire on schedule, you run the risk that the housing market will crater as the car market did after Cash for Clunkers expired.
The current plan, according to various news reports, is to push the Unemployment Compensation Extension Act (S.1699) through the Senate, with Senators voting on whether to add an $8,000 tax credit amendment to the bill perhaps as early as this afternoon.
