The NYT refers to the Isakson amendment that would allow a tax credit for a home purchase of 10 percent of the purchase price or $15,000 (whichever is less) as "more generous" than the current credit of $7,500 for first time homebuyers. The Isakson amendment will actually not be more generous to many homebuyers. Unlike the current credit, it is not refundable. This means that a family with little income tax liability, who could have received the full $7,500 under current law, may only be eligible for a small credit under the Isakson amendment. The article also describes this as a proposal to stabilize house prices. It is not clear that this is the intent. The existing law provides a credit to new home buyers, who are a net addition to demand in the market. This credit would go to any homebuyer, the vast majority of whom will be people who already own a home. If a person buys a home, but sells their current home, it has no net effect on the market.
--Dean Baker
