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Housing Fix April 3, 2008

Posted by pf in Expenses and Savings.
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Our federal government is moving at blazing political speed to finalize a $15 Billion band-aid to relieve some of the pressure wrought by the sub-prime mortgage mess. The potential provisions include the following:

  • Tax breaks for home-builders (up to 40% of the $15 billion cost)
  • Tax credits ($7,000) for purchasing homes already in or facing foreclosure
  • Additional property tax deductions for those who do not itemize their tax returns ($500 single / $1000 joint filers)
  • $4 billion for states to buy and rehabilitate homes
  • $100 million for counseling of homeowners at risk for foreclosure

While I can appreciate the difficult situation our politicians find themselves in (they gotta do something about this if they want to keep their office, don’t they?), I remain generally opposed to the whole thing.

1) Tax breaks for home-builders – being in business is a risk proposition and they fail every single day. If there is money to be made, someone else will fill the gap where another failed. I don’t think our tax dollars should be spent in this way as it manipulates the markets and artificially minimizes risks that are rightfully involved in such a venture (ie – no consequences for poor business decisions).

2) Tax credits to incent purchases of foreclosed homes- Again, another way of propping up home values and increasing sales instead of allowing supply / demand dictate the market. If prices would fall…then we need to let them fall.

3) Additional property tax deductions – why? I suspect this group of filers may be more likely to be involved in this stuff (I really have no idea…just a guess). Who knows, perhaps it was someone else’s idea for the stimulus package and they decided to throw it in there.

4) $4 billion for states to buy / refurbish homes – Don’t get me wrong, no one wants to see houses fall in disrepair, get boarded up or worse. However, again, I think the markets should be allowed to work and if there are no buyers for these houses…then so be it. Of course, if the taxpayer can gain from buying them at a discount now for possible returns in the future, then I could be persuaded.

5) Money for consumer counseling – sigh…unfortunately, this is sorely needed. However, did we need a crisis to figure this out? As a country we know almost nothing when it comes to personal finance and save for a few places, do not bother to teach it in our schools. I think I’m most disappointed in this because it’s only a quick fix and does not address the larger problem of financial illiteracy.

In essence, the taxpayers are being asked to save people from their own greed and stupidity. Granted, some may have been victim of fraud and we should help those people. However, I think it’s more often the former situation versus the latter. If you don’t know how to run your business, then it will fail as it should. If you don’t know how to manage your finances, then you may end up in dire straits…as you should.

Am I being harsh? Some might think so. Let me be clear in saying that I do not want bad things to happen to people. Also, I tend to be fairly liberal in my views about not having huge gaps between rich and poor, etc. However, I am strongly opposed to perpetuating the cycle. There needs to be accountability and consequences for our actions…otherwise, how do we expect to learn?



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