Skip to content

True Cost of the Tax Credit for Homebuyers

Not only is the American taxpayer getting taken by outright fraud from over 110,000 unlawful first-time homebuyer tax credits, but we are vastly overpaying for the economic benefit.  In my previous post about the true cost of government subsidies I stated that taxpayers spent about $7,234 per additional car sold because of the cash for clunkers program.  According to the Brooking insitute, the cost of the first-time homebuyer’s credit cost quite a bit more:

Each additional home sale generated by the $8,000 first-time homebuyers’ tax credit actually costs the government $43,000.

How’s that possible? Gayer figures that of the 1.9 million homebuyers that will get the $8,000 tax credit, 85% would have bought a house anyway. The price tag of $15 billion — about twice what Congress had intended — he reckons will result in approximately 350,000 additional home sales, at a price tag of $43,000 for each additional sale.

That’s nothing compared to the tab for a possible one-year, $15,000 tax credit for all home buyers (except those with high incomes.) Gayer figured that would cost the Treasury $73.9 billion, which he estimated would increase house sales by a total of 253,000. Each of those extra home sales would cost the Treasury $292,000 ($73.9 billion divided by 253,000.)”

The next time someone tells you how good the stimulus programs have been for the markets and the economy, remind them how much it is costing each one of us.

Posted in Economics, Politics.

Tagged with , , , , , .

Copyright © 2009-2013 SurlyTrader DISCLAIMER The commentary on this blog is not meant to be taken as an investment advice. The author is not a registered investment adviser. There is no substitute for your own due diligence. Please be aware that investing is inherently a risky business and if you chose to follow any of the advice on this site, then you are accepting the risks associated with that investment. The Author may have also taken positions in the stocks or investments that are being discussed and the author may change his position at any time without warning.

Yellow Pages for USA and Canada SurlyTrader - Blogged