Also: Estate tax repeal still up in air; chamber opposes net receipts taxMore than 160 members of Congress have signed a letter to Speaker of the House Nancy Pelosi and Minority Leader John Boehner requesting that the $8,000 homebuyer tax credit be extended.
“Since the tax credit was expanded in February,” the Oct. 21 letter reads, “we have seen house sales rise and glimpses of price stabilization. From April through July, we saw three straight months of rising prices of homes. The number of home sales rose 11 percent from May to June, the largest gain in eight years.”
It goes on to read, “At a time when billions are being offered to troubled financial institutions and mortgage rates remain borrower-friendly, nothing is restoring confidence in the market like the first-time homebuyer tax credit.”
As of now, the credit will expire Dec. 1, meaning a buyer would have to be in escrow within the next couple of weeks to benefit.
According to a survey from the California Association of Realtors, nearly 40 percent of recent first-time homebuyers said they would not have purchased a home if the federal tax credit for first-time homebuyers was not offered, and 70 percent said it was either “very important” or “most important.”
“It is clear that the federal tax credit for first-time homebuyers is working, as evidenced by the spike in home sales in recent months,” said CAR President James Liptak. “This tax credit is arguably the most successful strategy employed by the government’s efforts to stimulate the housing market."
Sen. Johnny Isakson, R-Georgia, and Senate Majority Leader Harry Reid, D-Nevada, introduced Senate Bill 1678 extending the credit to June 1, 2010.
Congress has still not figured out the death tax issue.
Due to the rest of the economic turmoil this country is dealing with, Congress has been tied up and has not addressed the fact that the current exemption and tax rate will completely go away as of the first of next year. Currently, estates over $3.5 million are subject to a 45 percent tax.
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“Because of the dramatic effect of what would happen if it went away, I think there will be a one-year extension on the current rate to give them more time,” said Steve Ghirardo, principal at Ghirardo CPA in Novato.
He said he doubts there will be a long-term solution until 2011.
But, he said, “There is no such thing as a permanent change on any tax issue.”
Other experts in the field say that with the amount of money that will change hands, there is no way Congress will let the exemption expire. The IRS collects upwards of $20 billion in taxes each year.
The California Chamber of Commerce has fundamental questions about the proposal to adopt a new business net receipts tax, a chamber-led coalition of more than 50 business and employer groups told legislators.
Nine of 14 commissioners of the Commission on the 21st Century Economy, including Chairman Gerald Parsky, signed the final report by the organization, which recommended the new business net receipts tax to offset revenue losses from flattening the personal income tax and eliminating the corporate income tax and the state portion of the sales tax.