Homebuyer tax credit: the scam of the century?
The Realtors backed it鈥� the home builders backed it鈥� the mortgage bankers backed it鈥� virtually anyone with an financial interest in residential real estate transactions backed the Homebuyer Tax Credit (and it鈥檚 expanded extension) and now that the program is finally complete and a whole host of indicators (NAHB builder sentiment, pending home sales, existing home sales, home prices, etc.) suggest that the its effects were at best temporary, we can see fairly clearly that this policy was a scam of epic proportions benefiting few and costing many.
Reports indicate that the total credit cost could exceed $20 billion and while the cost of administration and vetting of claims is yet to be determined, it can safely be assumed to have been very costly, so what did we get for our Keynesian tax stimulus efforts?
First, it鈥檚 important to recall that early on in the program implementation it was reported that there was a massive number of fraudulently filed claims with thousands coming from inmates, children and tax preparers supposedly acting without the knowledge of filers that did not purchase homes.
Needless to say, the IRS has been busy with audits, so much so that as of June they blocked or froze over a billion dollars of claim payments.
As for properly filed claims, many of the homes purchased with the credit have already declined in value in excess of the credit鈥檚 maximum $8000 benefit (i.e. a mere 2.5% decline on a $350,000 home) leaving many unwitting home 鈥渂uyers鈥� in the cruel predicament of sinking in a quicksand of asset price deflation for simply having jumped for a slight nibble of the government鈥檚 meager tax carrot.
Finally, in trying to fully understand why the government undertook such a useless and poorly calculated program, it鈥檚 important to recognize those who truly walk away from this policy in better standing.
Realtors, home builders and mortgage bankers鈥�. some of the most notable culprits of the housing bubble years鈥� all walk away cleanly skimming the proceeds coming from the transactions of an estimated 2 million temporarily stimulated home purchases.
It should come as no surprise that these were the very same industry groups that worked tirelessly lobbying to enact this failed policy鈥� it was a simple exchange鈥� your tax dollars to their wallets.
While Washington elites likely continue to celebrate the 鈥渟uccess鈥� of this ludicrous policy, those opposed can at least draw some consolation from the recent refusal of NJ governor Christie鈥檚 to enact a similar program possibly indicating that public sentiment has turned against such overtly illogical and wasteful government efforts.
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