The Senate has unanimously approved a $15,000 tax credit for individuals who purchase a home in the next year.
The tax credit was added as an amendment to the economic stimulus package now under debate. Senate Republicans are pushing for more tax cuts to be added to the package. The Senate approved the housing credit, which was introduced by Johnny Isakson, R-Ga., on Wednesday.
Isakson’s amendment would provide a direct tax credit of $15,000, or 10 percent of the purchase price, whichever is less, to any homebuyer. Purchases must be made within one year of the legislation’s enactment, and the tax credit would not have to be repaid.
“It is time to fix America’s problem, not throw money at the symptoms,” said Isakson (pictured) in a statement. “It is time to fix housing first. It is rare that we have a road map to success in times of difficulty, but this country has once before realized a housing crisis every bit as bad as the one we have today and economic troubles every bit as dangerous.”
Isakson, a former real estate agent, pointed out that in the mid-1970s, America faced a similar housing crisis when a period of easy credit and loose underwriting flooded the market with new construction. Congress responded by passing a $2,000 tax credit for anyone purchasing a new home for their principal residence. Isakson said that home values quickly stabilized, housing inventory dropped and the market recovered.
His amendment would allow taxpayers to claim the credit on their 2008 income tax returns. It also seeks to prevent misuse by only allowing purchases of a principal residence and by recapturing the credit if the home is sold within two years of purchase. The amendment would sunset the current $7,500 housing tax credit on the date of enactment.
On Tuesday, the Senate approved another amendment that provides a tax incentive for car buyers. The amendment, introduced by Barbara Mikulski, D-Md., makes interest payments on car loans and state sales or excise tax deductible for new cars purchased between Nov. 12, 2008 and Dec. 31, 2009.
“President Obama said the goal for the economic recovery program is to create jobs and save jobs,” said Mikulski in a statement. “That’s exactly what my amendment does. It’s targeted at saving American jobs and helping families buy the cars they need to get to work and take their kids to school.”
However, Obama indicated Wednesday that he does not want the stimulus bill to become overly tilted toward tax cuts, despite the demands of Republicans to reduce the spending component.
“I’ve heard criticisms of this plan that echo the very same failed theories that helped lead us into this crisis, the notion that tax cuts alone will solve all our problems, that we can ignore the fundamental challenges like energy independence and the high cost of health care and still expect our economy and our country to thrive,” he said, according to The New York Times. “I reject that theory and so did the American people when they went to the polls in November and voted resoundingly for change. So I urge members of Congress to act without delay.”
The Senate may vote as soon as Thursday night on the bill, but if it is approved, it will need to be reconciled with the House version.
Republicans are pushing for a much less expensive version with more tax cuts, including halving the 10 percent tax rate on married couples with incomes up to $16,700, and cutting the rate from 15 to 10 percent on couples earning between $16,700 and $67,900.
Senate Democrats pushed back against many of the amendments offered by Republicans on Wednesday evening, prompting Senate Minority Leader Mitch McConnell, R-Ky., to complain Thursday that Democrats were ignoring President Obama’s call for Congress to “trim out things that are not relevant to putting people back to work right now.”
“This week, Republicans have tried to improve this bill in a number of ways,” said McConnell. “One goal was to cut out the waste and bring down the total cost. So far, Democrats have rejected those efforts.”
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