Why the GOP's Tax Gimmick for Homebuyers Won't Help One Bit
Editor's note: This article originally appeared in PEEK, AlterNet's blog section.
Update: After this post was completed, the Senate tacked a $15,000 tax credit for new homebuyers onto the stimulus package.
According to the New York Times, "Republicans and Democrats are suddenly competing to bail out financially struggling homeowners." What fine news!
But let's look at their competing visions because the Devil, of course, is in the details* ...
There is a growing consensus among lawmakers in both parties that the deepening collapse of the housing market is at the heart of the country’s acute economic downturn.
But beneath the consensus over helping the housing market, there are huge differences over who should benefit under the competing plans. Democrats want to aim money directly at people in the greatest distress; Republicans want to aim money at almost all homebuyers, on the theory that a rising tide will eventually lift all boats.
Senate Republicans are seeking new tax breaks and up to $300 billion in mortgage subsidies to attract homebuyers. Democrats want to spend at least $50 billion on federal programs aimed at reducing mortgage foreclosures.
First, the obvious: the Times piece is misleading: Democrats proposals are aimed at aiding homeowners, and Republicans want to give cash to <s>perspective</s> prospective homebuyers. Of course, that would help a small number of homeowners who are trying to sell in this market, but it's hardly the same thing as trying to help the 16 percent of homeowners who are now struggling under the weight of loans that are worth more than the value of their properties. And it won't help those whose adjustable rates have adjusted through the roof.
And the GOP's approach is based on the theory that a "rising tide will lift all boats." A simple question: how's that theory been workin' out for ya?
But let's forget about ideology for a second, and look at this from a commonsense perspective ...