New Jersey legislators have cooked up a truly horrible idea: encouraging sprawl through tax credits.
From the Record (via the NJ Real Estate Report):
Bill would create N.J. homebuyer tax credit
In an effort to boost the state’s housing market, New Jersey legislators have introduced a bill that would give home buyers an income tax credit of up to $15,000, spread over three years.
“The housing industry is at an all-time low,” said Sen. Paul Sarlo, a Wood-Ridge Democrat and a co-sponsor of the bill. “The economic output that will be generated from these homes being built will be quite significant and will really help to stimulate the economy.”
The home-building industry has been slammed by the housing downturn. In New Jersey, fewer than 12,000 new housing units were built in 2009 — the lowest number since World War II. As a result, unemployment has soared among construction workers.
The bill would target new construction, with 75 percent of the tax credits going to buyers of newly built homes and 25 percent going to buyers of existing homes. Existing home sales make up the large majority of home sales.
If passed, the tax credit would cost the state Treasury $100 million over three years, at a time when New Jersey is in dire financial straits. But Sarlo said the economic stimulus would more than make up for those lost revenues.…Because the tax credit’s cost is capped at $100 million, a total of 6,667 buyers would be able to claim the credit — 5,000 of them new-home buyers. The credits would be available on a first come, first served basis.
Tax credits for home purchases are bad for the economy. Rather than allowing the real estate market to return to a reasonable level, they allow imbalances to continue. Tax credits are bad for home owners since they prop up the market now which means it just puts off the day of reckoning. Tax credits are bad for purchasers since they give over-extended purchasers money for furniture and renovations while causing prices to stay high, thus forcing them to pay more in mortgage interest later. Tax credits are bad for everyone since they are a needless waste of government revenues. In other words, they support the play-now, pay-later mentality that brought us the bubble in the first place and help the banks, real estate industry at everyone else’s expense.
But now, in an effort to help developers, state legislators are proposing a state tax credit of $15,000 for home purchases. Worse yet, the vast majority of this will go to new construction, in other words to sprawl.
New Jersey residents need to fight this awful bill.
