Wednesday, August 18, 2010

Fraud in the First-time Home Buyers Tax Credit Program

Do you recall the $8000 tax credit that we tax-payers funded for first-time home buyers that artificially improved the 2009 economic numbers, especially in housing starts? Well, according to a CNN report $28 million of those tax payer dollars were “improperly” spent. Now $28 million is not even a drop in the bucket when compared to our nearly $14 trillion dollar deficit, but it is symptomatic of the problem of every single government program in existence. It typifies the fraud, waste, and inefficiencies of the federal government. It is especially infuriating when such tax-payer money is spent on programs that the government has absolutely no constitutional basis in which to justify their involvement.

To make matters even worse, $9 million out of that $28 million dollars of improperly allocated tax payer money went to help prison inmates with their first-time home buying credits. 241 of these inmates were incarcerated and serving life sentences. It would seem that originally there was no requirement for providing even basic documentation to the federal government that the $8000 dollar credit was ACTUALLY used to purchase a home.

The “problem” was corrected towards the end of the tax credit program when the government developed Form 5405 accordingly in January of this year. According to Assistant Treasury Secretary Michael Mundaca the, “IRS has already begun to take additional steps to prevent fraud in the program.” The program ended in May of 2010.

Care to make any bets that the government will be on top of any “fraud” and “improperly allocated” money that will be spent with our wonderful new health care system?


Dave Splash said...

So, you're saying there is no fraud in private business? Ever heard of Bernie Madoff, Enron, World Comm, etc?

I know this will fall on deaf ears, but the First Time homebuyer tax credit was wildly successful. I work in real estate, and know first hand how much it saved the housing market from total collapse. It moved people from "on the fence" to actual buyers. It was a nationwide success, and now that it is over (since the GOP is filibustering the extension of a tax break - I thought they were opposed to higher taxes), the market is weakening.

It was also successful because the benefit was not directed toward millionaires and billionaires, and instead toward the Middle Class (which is the true conservative objection since they hate the middle class). People on the lower end of the market buy a house, those sellers can now move up to a bigger house, and so on and so on. You can't decrease the housing inventory without sales, and you can't bring prices back up without decreasing the inventory. It's kind of common sense.

What was the Republican alternative? Oh, right. Nothing. As usual.

T. Paine said...

Dave, do you really not understand the difference, sir?

Maddoff, Enron etc first were punished and jailed for their fraud. What are you going to do to the prisoners that defrauded the government? Put them in prison again?

More importantly Maddoff, Enron etc were not directly fleecing our country out of tax-payer's money.

Next, tax cuts are great in principle, but they need to be done in an equitable way and not further our goliathan national debt burden.

I am quite certain that this tax cut did indeed help the housing industry and first time buyers, as I noted in the posting. The cash for clunkers program also inarguably stimulated the auto industry.

Something else these programs have in common is that when the tax-payers wallet was closed to these programs the housing and auto industries also degraded once again. This artificial boost helped a few people at the expense of all Americans and our national debt.

We cannot keep spending money as a nation that we do not have, even for targeted tax cuts that benefit just a few people.

Dave Splash said...

"tax cuts are great in principle, but they need to be done in an equitable way"

Sorry, man, I am laughing too hard to read the rest. Equitable? Coming from a conservative? Zero precedent for that, my friend.

T. Paine said...

Splash, you seem to advocate tax cuts for those that don't pay any taxes, therefore your resulting laughter.