Published Wednesday May 7, 2008
A tax credit for home buyers? (no illegals need apply!)

WASHINGTON — Rep. Lee Terry, R-Neb., has what he hopes will prove to be the cure for the country's ailing housing market — a $10,000 income tax credit for those who purchase a home.

House Republican leaders on Tuesday touted Terry's tax credit idea as one-half of a two-pronged approach to dealing with the housing crisis and its role in the country's current economic woes.

The second part would offer consumers protection from disreputable mortgage lending practices.

The Republican proposal is being offered as an alternative to a plan put forward by Democrats, one that could reach the House floor as early as today.

Crafted by House Financial Services Committee Chairman Barney Frank, D-Mass., the Democratic proposal would make as much as $300 billion in new loans available to distressed borrowers.

Terry called his proposal forward-looking and focused on responsible everyday Americans.

Inventories of houses have stacked up in part because people's confidence is shaken, the Nebraska lawmaker said.

Many homeowners would like to move but are holding off on buying another house because they're worried that they won't be able to sell the one they have, he said.

If passed, the proposed tax credit would be available for 12 months. It is aimed at persuading people to take the leap and break the current housing logjam, Terry said.

Under the plan, home buyers would be able to deduct the amount of the credit from their federal income tax liability. If the credit exceeded the tax liability, they could carry the difference over for one year.

The maximum credit allowed would be $10,000. The credit would be capped at 10 percent of a home's purchase price, so the purchase of a $90,000 house would trigger a credit of $9,000.

The exact cost of the proposal to the government isn't yet known, Terry said.

The credit would apply only to the purchase of a primary residence, not a vacation home or investment property.

Illegal immigrants would not be eligible. Neither would anyone who has "flipped" a home within the one-year period or has sold a house between relatives simply to receive the credit.

The two Democrats vying to challenge Terry in November, Jim Esch and Richard Carter, both said Terry's proposal fails to address the plight of people currently facing foreclosure.

Terry said that by helping to reduce inventories, his proposal would help maintain home values, spark the economy and create jobs.

The legislation faces an uphill battle. Frank already has lined up widespread support for the Democratic bill by offering several concessions. He even has the backing of a number of Republican House members.

"It will be a package, like any package, in which nobody may like every single thing in it — except maybe me," Frank said of the housing rescue plan.

"He's struck a good balance," said Rep. Steven LaTourette, R-Ohio, one of 10 in his party to break with President Bush and GOP leaders to back the Democratic plan when it went through Frank's committee last week.

LaTourette said Frank sold him on the plan by making it voluntary and pointing out that it is projected to help hundreds of thousands of homeowners at a cost of only $2.7 billion over five years.