In what the Washington Post called a “significant victory for Republicans,” the Senate adopted a housing tax subsidy amendment to the stimulus package. Proposed by Sen. Isakson of Georgia, it “would offer a tax credit of up to $15,000 for any home bought as a primary residence, for one year after the stimulus bill is signed into law.” Just because Republicans choose to call something a “tax credit” it doesn’t mean it is any better than government spending. In fact, this particular provision boosts the price tag of the stimulus bill by $19 billion.
We got into this mess, in large part, as a result of government policies that encouraged people to purchase homes, which in many cases they couldn’t afford. It would be unwise to create new incentives for irresponsible behavior as a way of digging ourselves out of this crisis. The proper way for the housing market to recover is to let prices keep falling until they get low enough to tempt new buyers. There are plenty of people out there who missed out on buying a home during the housing boom, but who would be lured into the market if prices drop to a certain level. This would just artificially prop up housing prices, at taxpayer expense.