U S House may vote as early as today to extend tax credit

By Brian Faler

Nov. 5 (Bloomberg) -- The U.S. House may vote as soon as today on a $45 billion plan to expand a tax credit for first- time homebuyers, extend jobless benefits and provide tax refunds to money-losing companies.

The measure won Senate approval yesterday on a 98-0 vote, and House passage would send it to President Barack Obama for his signature into law. House Majority Leader Steny Hoyer, a Maryland Democrat, said the chamber may act on it today.

The plan would be the first major extension of provisions in February’s economic stimulus plan. The $8,000 homebuyers’ tax credit, slated to expire this month, would continue until April 30, and be expanded to include people with higher incomes and some who already own homes. That would cost about $10 billion in the fiscal year that began Oct. 1, according to Congress’s Joint Committee on Taxation.

The measure includes $2.4 billion to extend unemployment benefits for as many as 20 weeks, enough to aid the jobless through the holiday season. It would also loosen tax rules for homebuilders and other money-losing companies to allow them to claim this year an estimated $33 billion in tax refunds.

The legislation had been delayed for weeks in the Senate by Republican demands for votes on amendments to the plan.

“Republicans used every trick in the book to slow and stall and ensure we can’t do important work,” said Senate Majority Leader Harry Reid, a Nevada Democrat.

Senate Minority Leader Mitch McConnell, a Kentucky Republican, has said the legislation could have been approved last week if Democrats had agreed to his colleagues’ demands. Republicans unsuccessfully sought votes on several amendments, including one to ensure the end of the Treasury Department’s Troubled Asset Relief Program.

Other Measures

Lawmakers are still considering whether to extend several other elements of the stimulus package, including subsidies to help the jobless buy health insurance and increased funds for food stamps. Obama has called for sending seniors $250 checks because they won’t get a cost-of-living increase next year in their Social Security payments.

Michael Mundaca, nominated to be assistant secretary for tax policy at the U.S. Treasury Department, said the administration may seek to extend the interest-subsidized Build America Bonds created as part of the stimulus package. Mundaca told the Senate Finance Committee yesterday the initiative is “too successful to allow to go away.”

The Treasury Department estimates that more than 1.4 million Americans have taken advantage of the homebuyer credit at a cost so far of about $10 billion.

Increased Limits

Couples earning as much as $225,000 a year and individuals earning up to $125,000 would qualify for the credit. That is up from the current $75,000 limit for individuals and $150,000 for couples. The Senate plan also would allow homebuyers who have lived in a residence they own at least five years to receive a $6,500 credit.

Those buying homes worth more than $800,000 wouldn’t be eligible for the credit; those who sell their new home or stop using it as their main residence within three years would have to repay the credit.

The credit “really does provide some economic lift in the country at a time when we desperately need economic lift,” said Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat.

He said expanding the credit to those who already own homes would help create jobs because “the move-up buyer is more inclined and capable of buying that furniture, maybe building a porch, putting a garage on, a new roof” and making the “kinds of investments I think is going to be a job-creator across the country.”

Waste of Money

Senator Christopher Bond, a Missouri Republican, called the tax credit a waste of money, saying studies show that most of those claiming the break would have bought homes anyway.

“For the vast majority of cases, the homebuyer credit amounted to a free gift since it did not affect their decision to purchase,” he said on the floor this week. “The homebuyer tax credit is a terribly inefficient, irresponsible and poor use of scarce taxpayer resources.”

Goldman Sachs Group Inc. said in a Nov. 3 research note that the credit probably spurred 200,000 home sales that otherwise wouldn’t have occurred.

Extending the credit to people who own homes wouldn’t reduce the excess housing blamed for the slump because “every buyer taking advantage of the move-up credit would necessarily be a seller,” Goldman Sachs said. It said the plan may increase housing prices by 1 percent because “sellers are likely to incorporate a fraction of the credit amount in their sale prices.”