Sen. Bill Nelson's populist proposal to pump earmark money into homebuyer tax credits is getting a "no sale" from Republicans.
Speaking at the Southwest Florida Chamber of Commerce, Nelson called for the restoration of an $8,000 tax credit to first-time homebuyers, and $6,500 going to repeat buyers.
Nelson claimed that in the first quarter of this year, the tax credit triggered a 6 percent increase in all home sales and a 42 percent increase in the sale of new homes.
"That is the kind of boost we need to get Florida moving again. Thats why next week Im going to file legislation that will reinstitute the tax credit for 2011," the senator said.
But critics of the plan say neither Nelson nor anyone else can accurately gauge what effect, if any, such government-issued credits have on home sales.
Curtis Dubay, a tax policy analyst at the conservative Heritage Foundation, calls Nelson's scheme "ridiculous on two fronts."
"First of all, eliminating earmarks does not cut spending. It's money that, in most cases, has already been appropriated," Dubay said from his Washington, D.C., office.
"Second, the homebuyer credit simply doesn't work. It's absurd to think that people spending more than $100,000 on a house will be motivated by an $8,000 credit.
"Fact is, the credit doesn't defray the price of the house, it's just captured by the seller in the form of propped-up prices," Dubay said.
U.S. Rep. Tom Rooney, R-Tequesta, suggested that Nelson's proposal is driven by brazen politics as much as fuzzy economics.
I appreciate that, after two years of racking up the largest deficits on record, Sen. Nelson and other Democrats are finally willing to look at ways to cut wasteful spending, but this proposal would simply rob Peter to pay Paul," said Rooney, who has been mentioned as a potential Nelson rival in 2012.
"The savings from cutting earmarks should go to reduce the deficit.I support restoring the homebuyers tax credit to give our housing market a much-needed boost, but we need to pass significant spending cuts to pay for this program and start paying down our debt.
While Nelson talks about "putting money into the pockets of taxpayers," Dubay says the best thing government could do would be to stop meddling in the housing market altogether.
"If you want something to work, cut spending, stop the government intervention and let the market heal," Dubay said. "If Washington had done that two years ago, the economy would be recovering now."
Meanwhile, the conventional wisdom persists that rising home prices are always desirable. Patrick Killelea, who founded the housing website patrick.net, says that's not necessarily so.
"There is a feeling of terror that if house prices were allowed to be set by the unmanipulated free market, all consumer spending would stop and permanent deflation would take hold. That just wouldn't happen," Killelea states.
"Consumers will always spend on things they need, and deflation will naturally stop at the point where a house is once again cheaper to own than to rent," he says.
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Contact Kenric Ward at kward@sunshinestatenews.com or at (772) 801-5341.
