Senate May Pass Homebuyer Tax Credit Extension Today
Nov. 4 (Bloomberg) -- The U.S. Senate may approve as earlyas today a $45 billion plan to expand a tax credit for first-time homebuyers, extend jobless benefits and provide tax refundsto money-losing companies.
The Senate voted 97-1 to end debate on the measure andclear the way for final approval. The Senate is likely to passthe legislation and send it to the House, where Democraticleaders predicted it would be quickly forwarded to PresidentBarack Obama to be signed into law.
The plan would be the first major extension of provisionsin February’s stimulus package. The $8,000 homebuyers’ taxcredit, slated to expire this month, would continue until April30 and be expanded to include people with higher incomes andsome who already own homes. The credit would cost $10 billion,according to Congress’s Joint Committee on Taxation.
The measure includes $2.4 billion to extend unemploymentbenefits for as many as 20 weeks, enough to aid the joblessthrough the holiday season. It would loosen tax rules forhomebuilders and other money-losing companies to let them claiman estimated $33 billion in tax refunds this year, according toJoint Committee on Taxation estimates.
Senators voted 85-2 on Nov. 2 to advance the legislation.It has been delayed for weeks by Republican demands for votes onamendments to the plan.
‘Every Trick in the Book’
“Republicans used every trick in the book to slow andstall and ensure we can’t do important work,” Senate MajorityLeader Harry Reid, a Nevada Democrat, said today.
Senate Minority Leader Mitch McConnell, a KentuckyRepublican, has said the legislation could have been approvedlast week if Democrats had agreed to his colleagues’ demands.Republicans sought a vote on an amendment to end the TreasuryDepartment’s Troubled Asset Relief Program.
Lawmakers are still considering whether to extend severalother elements of the stimulus package, including subsidies tohelp the jobless buy health insurance and increased funds forfood stamps. Obama has called for sending seniors $250 checksbecause they won’t get a cost-of-living increase next year intheir Social Security checks.
Michael Mundaca, nominated to be assistant secretary fortax policy at the U.S. Treasury Department, said theadministration may seek to extend the interest-subsidized BuildAmerica Bonds created as part of the stimulus package. Mundacatold the Finance Committee today the initiative is “toosuccessful to allow to go away.”
The Treasury Department estimates that more than 1.4million Americans have taken advantage of the homebuyer creditat a cost so far of about $10 billion.
Increased Credit
The Senate plan would allow homebuyers who have lived intheir residence at least five years to receive a $6,500 credit.Couples earning as much as $225,000 a year and individualsearning up to $125,000 would qualify. That is up from thecurrent $75,000 limit for individuals and $150,000 for couples.
Those buying homes worth more than $800,000 wouldn’t beeligible for the credit. Those who sell their new home or stopusing it as their main residence within three years would haveto repay the credit.
Senator Christopher Bond, a Missouri Republican, had calledthe tax credit a waste of money, saying studies show that mostof those claiming the break would have bought homes anyway.
“For the vast majority of cases, the homebuyer creditamounted to a free gift since it did not affect their decisionto purchase,” he said on the floor this week. “The homebuyertax credit is a terribly inefficient, irresponsible and poor useof scarce taxpayer resources.”
Goldman Sachs
Goldman Sachs Group Inc. said in a research note yesterdaythat the credit probably spurred 200,000 home sales thatotherwise wouldn’t have occurred.
Extending the credit to people who own homes wouldn’treduce the excess housing blamed for the slump because “everybuyer taking advantage of the move-up credit would necessarilybe a seller,” Goldman Sachs said. It said the plan may increasehousing prices by 1 percent because “sellers are likely toincorporate a fraction of the credit amount in their saleprices.”
The bill would provide 14 additional weeks of unemploymentbenefits in all states, plus another six weeks in states withthe highest jobless rates. The extension would be the fourthsince the recession began. The share of unemployed people whohave been out of work at least six months has reached thehighest level in at least a half-century, according to the LaborDepartment.
The legislation also would expand provisions in thestimulus package allowing companies to apply their losses toprevious years’ income, thereby reducing their tax bills andallowing them to claim refunds. Banks and other institutionsreceiving assistance from the Treasury Department’s TroubledAsset Relief Fund wouldn’t be eligible.
To contact the reporter on this story:Brian Faler in Washington at bfaler@bloomberg.net
Last Updated: November 4, 2009 13:45 ESTSource: Bloomberg
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