By Ian Swanson - 10/13/09 03:40 PM EDT
Those purchasing new homes would be eligible for an $8,000 tax credit under legislation to be introduced by Sen. Johnny Isakson (R-Ga.).
Isakson will offer the tax break for homebuyers as an amendment to legislation extending unemployment benefits, according to his office.
Isakson’s measure would greatly expand an $8,000 tax credit included in the $787 billion economic stimulus package Congress approved earlier this year. That credit expires at the end of November.
This would greatly increase the cost of the tax credit at a time when the government is dealing with record budget deficits. The stimulus bill was considered emergency legislation and was not offset with other spending cuts or tax increases, but it is not clear whether the new credit would be treated the same way.
The existing law is estimated to cost the government about $1 billion a month in lost revenue. Expanding the pool of people eligible to win it could cost as much as $30 billion, according to an estimate by Mark Zandi, the chief economist at Moody’s Economy.com, provided to The New York Times.
Given the rocky economy, it could be tough for lawmakers to oppose the bill, particularly ahead of the 2010 midterm elections.
While there are signs that the housing market has hit bottom, home values continue to fall, as do foreclosures. National housing prices fell 7.8 percent in June 2009 compared to June 2008, according to First American CoreLogic, which tracks housing data.
The National Association of Realtors has been lobbying heavily for an extension of the tax credit, and for expanding it to all homebuyers. The tax credit could also receive support from other interests, such as groups representing home builders and mortgage bankers.