The Senate voted Wednesday to renew the government’s $8,000 tax credit for first-time home buyers through the first six months of next year as part of a broader bill designed to extend unemployment benefits.
Heritage fellow Ronald Utt explains why this is terrible public policy:
Under the expiring law, the housing tax credit is available only to first-time homebuyers with annual household incomes no higher than $150,000 (for a married couple). Although an income of this magnitude puts the household comfortably within the top 20 percent of earners, census data show that the homeownership rate among households with incomes in excess of $100,000 is about 88 percent, meaning that few in this income class would qualify as first-time buyers.
Senator Isakson’s proposal would make sure that the next government-subsidized rising tide lifts not just the little boats but the sleek yachts too, so he has proposed that the $8,000 housing tax credit be extended until June 2010 and that eligibility be expanded to include (1) households with incomes of up to $300,000 (for a married couple) and (2) those who already own a home.
To put this in perspective, only 2 percent of American households earn more than $250,000, so this new subsidy would be available to all but a handful of the super wealthy. The Joint Tax Committee estimates that this tax credit extension will cost taxpayers almost $17 billion over the next five years.
So why is the leftist majority in the Senate joining Isakson in bailing out the rich? Heritage’s Mike Franc explains:
For the demographic reality is that, in America, the Democratic party is the new “party of the rich”. More and more Democrats represent areas with a high concentration of wealthy households. Using Internal Revenue Service data, the Heritage Foundation identified two categories of taxpayers — single filers with incomes of more than $100,000 and married filers with incomes of more than $200,000 — and combined them to discern where the wealthiest Americans live and who represents them.
Democrats now control the majority of the nation’s wealthiest congressional jurisdictions. More than half of the wealthiest households are concentrated in the 18 states where Democrats control both Senate seats.