Tax incentives one way to boost sales
They won't turn the housing market around all by themselves, but we do like a couple of tax incentives proposed by Inland Valley legislators.
State Sen. Bob Dutton, R-Rancho Cucamonga, and Rep. David Dreier, R-San Dimas, have introduced bills that would provide tax incentives for home buyers on state and federal levels, respectively.
In each case, the tax breaks would be temporary, aimed simply at helping to restart the moribund housing industry and its associated businesses.
Dutton introduced his bill last week in the state Senate. It would give buyers of new homes between March 2009 and March 2010 a one-time state income tax credit of up to 5 percent of the purchase price. The credit would be capped at $10,000 - so it would represent 5 percent of a purchase price up to $200,000 and a lower percentage of a more expensive house - and would apply only to a home used as a primary residence.
"For every home that sells, it generates revenue - new revenue," Dutton said. He recalled that a similar credit during a nine-month period during a housing slump in 1975 resulted in a 25 percent increase in housing sales.
He's hoping to put not only those in the construction industry back to work, but also the ancillary businesses - furniture sellers, moving companies and the like - that pick up work when a family moves into a home.
That brings up the one tweak we'd like to see in his bill - as written it applies only to new homes, but why
not include existing homes? Granted, a resale doesn't perk up the construction business, but it stimulates those housing-related businesses and keeps people working.
Dreier's bill, which we endorsed last month, would provide a federal tax credit of $5,000 to a buyer who puts down at least 10 percent of the purchase price of a home, or $10,000 for a down payment of 15 percent or more. He's aiming to promote responsible lending and borrowing, in which the buyer has a sizable stake in the house he buys.
The credit would be available for house purchases in 2009 and 2010, and then sunset. The credit would have to be repaid on any house that is resold sooner than three years, to ward off speculators - though we've heard the argument that the stipulation would stifle legitimate move-up resales as well.
Dreier reintroduced his bill this month in the new session of Congress, along with a similar bill applying to car sales. That one would grant a federal tax credit in the amount of the sales tax paid.
Dutton's and Dreier's tax-incentive-based efforts might not be the be-all and the end-all of getting real estate moving again, because credit liquidity, employment and consumer confidence are more important - but difficult to improve. As part of a tool kit to help the housing market, and hence the economy, we favor both measures.
