As I have mentioned before, I do taxes for myself and a few friends and relatives. Several of these folks have taken advantage of the first-time homebuyers refundable credit/loan. Basically, a first time homebuyer who meet the financial criteria can get a refundable credit up to $7,500 that will be paid back at $500 per year over 15 years.
Tonight, the Senate has apparently upped this amount to $15,000 and (possibly) removed the first-time buyer requirement. This raises some questions for me that I would like to comment on.
First, there should be a way to make this retroactive. If a qualified buyer has already taken the $7,500 on his 2008 return, he should be able to get the additional $7,500 on his 2009 return.
This is something they are doing now with the stimulus checks that came out last year. People who did not receive one throughout the year are now eligible to recoup that via a tax refund. This is generally set up for those who did not file a 2007 tax return and thus missed the check they were owed.
Second, if this is accepted, they should not keep it at the 15-years while doubling the payback amount to $1,000. Instead the amount should remain at $500 per year and the term extened to 30 years.
Backing up to point one, there is always the possibility of allowing people to take the additional $7,500 mid-year instead of waiting for next year's tax filing.
Here is why I don't like this. Yes, it would be a "shovel-ready" stimulus. But it would cost a ton, and injecting the whole $15,000 per right away may lead to a glut of spending now followed by a lull.
This is where I bring politics into the mix. The $7,500 is going to be huge, imo. More than people think. So let's get that now. The additional $7,500 will be injected into the economy around this time 2010 and reflected in the summer of that year, aka the beginning of the campaign cycle.
In sum, priority one should be getting the money to people who need it now. Priority two should be making sure that the stimulus is sustained and not in a manner that will put people (and the economy) back into the mess next year. Priority three should be recouping the money back into government coffers.
I would go on about increasing the child tax credit and the EITC, but I want to stay on sustainability. So let me end by saying that the $500 per month repayments are on a two year deferrment. Here is how the plan would play out for troubled homeowners, the economy, and the deficit:
2009- $7500 per homeowner stimulus
2010 - $7500 per homeowner stimulus
2011 - 2026- the government begins recouping $500 per year per homeowner