So our all-wise representatives in Congress got together to try to come up with some kind of response to the housing crisis -- this is an election year after all -- and here's what they came up with: tax breaks for home builders.
The $6 billion package will let homebuilders use losses from 2008 and 2009 to offset income in the previous four years, rather than the usual two.
It's hard to know where to begin in describing how incredibly idiotic this is but I like a good challenge. First of all, we're giving tax breaks to companies that got into this mess because of massive over-investment and oversupply. Aren't we supposed to use tax breaks to encourage investment in areas that need further investment, not the opposite? This just makes no sense.
Why this is stupid, part two: These handouts may allow builders to avoid distressed sales which could have presented a fabulous, once in a lifetime opportunity for first-time home buyers to gain their piece of the American Dream. Instead of allowing regular people to capitalize on big business' blunders, our government has stepped in and used taxpayer money to keep the builders happy. That's stupid, and it's also wrong.
Further, the Associated Press reports that the bill contains a $7,000 tax credit for people buying properties in foreclosure.
This might sound like a good idea but foreclosure investors generally aren't stupid. The tax credit will be factored into investors' calculations about what they can pay, and much of that tax credit will simply be used to bid up foreclosed properties to higher prices -- which benefits the banks at the expense of taxpayers. I'm beginning to discern a pattern here.
It's no surprise that Congress' efforts to intervene are pathetic and counterproductive, but you still have to stand in awe of the tackiness of this "bipartisan agreement."
Comfort Zone Investing: The unmighty dollar
Five winners of a weak dollar
For a quick-read on the U.S. economy, check the price of gasoline
Reader Comments (Page 1 of 1)
4-03-2008 @ 1:05PM
Ninjaneer said...
But what can we do about it? That's the other source of my frustration with this matter...