Innovative ways to stimulate the economy: A transferable homebuyer's credit
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Under the most recent economic stimulus package, first-time homebuyers are eligible for a nonrepayable $8,000 tax credit if they buy a home. The rationale behind the credit is a growing consensus that a rebound in housing will be crucial to any economic recovery.
CNBC anchor Dylan Ratigan had a great suggestion for a housing tax credit: Provide every active member of the U.S. military with a $50,000 transferable homebuyer tax credit. If they don't want to buy a home, they can sell the credit to someone who does and keep the cash. The idea behind this plan is that the effort to prop up the housing market would benefit people in the armed forces -- not people who lied on mortgage applications and bought homes they couldn't afford.
Conferring such a huge benefit only on people who happen to be in the military seems a little unfair, but Ratigan is on to something. The homebuyer tax credit should be made transferable, allowing people who might not be in the best position to buy a home right now to get some cash to help stimulate the economy, while also giving prospective homebuyers and investors an incentive to dive into the housing market.
Otherwise we run the risk of doling out tax credits that won't be used or, even worse, providing people who really shouldn't buy a home with an immediate incentive to do so, putting their families at risk of financial insecurity and foreclosure. And if that happens, the effort to dig out of housing crisis number one could very easily lead to housing crisis number two -- second verse same as the first.
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