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Contrary to all the advice TaxVox offered, the Senate last night voted to extend the Homebuyer’s Tax Credit for seven months and expand it to include many people who already own homes. The House will likely follow suit today.
I have clearly misread the mood of Congress and the country. And I should have known better. Ever since the Tax Reform Act of 1986, Congress has larded the revenue code with credits and deductions to encourage retirement saving, college attendance, homeownership, and healthcare. This year’s stimulus bill created new tax benefits to boost demand for housing and autos, and President Obama’s 2010 budget would expand tax credits for retirement savings. And just this past Tuesday, voters resoundingly chose two new governors who promised to cut taxes to encourage economic development.
Now that I understand the thinking of Congress and the country, may I suggest a few new tax credits that will help the economy recover from its recent doldrums? Any member of Congress may freely adopt one or more, preferably without attribution.
New Stock Buyers Tax Credit: Despite its recent rebound from last year’s lows, the Dow Jones Industrial Average remains 30 percent below its high just over two years ago. The credit would go to new stock buyers (defined as people who have owned less than $100,000 of common stock during the past six months) and equal 25 percent of up to $50,000 of the cost of stock purchased between now and October 1, 2010 (the third anniversary of the Dow’s record high). No income limits would apply but college students on scholarships could not claim the credit. Nor would the credit have any age restrictions although children could claim the credit only if they can count to twenty with shoes on.
Real Books Tax Credit: The sale of real books is plummeting, as former buyers shift to electronic books or borrow paper copies from the library in an effort to cut costs in the slow economy. And bricks-and-mortar bookstores have suffered further from price-cutting by on-line booksellers. A refundable tax credit equal to the full suggested retail price of eight books per eligible taxpayer purchased from retail bookshops with average annual sales over the past six years of no more than 500 copies of the year’s top 25 fiction best sellers would generate a rapid increase in demand for struggling booksellers. Qualifying purchases would have to occur on weekdays between now and the conclusion of the 2010 National Reading Week next May. People whose libraries contain more than 125 books published since 2001 could not claim the credit.
Santa Claus Tax Credit: Retailers predict desultory holiday sales this year. The Santa Claus credit would pump up purchases by reducing the after-tax cost of gifts purchased and given by the end of 2009. The non-returnable credit would equal half the cost of any gift bought in person by people using handwritten letters to Santa from children under age 15 who live with relatives at least nine months during 2009 and still believe in Santa, the tooth fairy, and the Easter bunny. Alternative credits would benefit people who celebrate Hanukkah, Kwanza, or the winter solstice.
My list of possible tax credits is hardly exhaustive but it clearly addresses the mood of Congress and the country: no foundering market should lack its own personal tax stimulus.
Posts and comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.