Housing Act

Housing Act

“Rich Housing Revitalization Act Proposal 2011-12”

 

The Housing Stimulant Act is my proposal to stimulate the housing industry and market with tax credits for consumers purchasing new or foreclosed houses.  The Housing Stimulant Act would consist of several incentives for consumers who can afford to purchase a home in the United States.  This Act could stimulate not only the Housing Industry but it would single handedly create thousands of new careers/jobs through the purchase of new or foreclosed homes.

 

As we all know the Housing Industry is one of the most influential career creators in our economy.  When people are working they can afford to purchase homes and other consumer goods.  This Act would help absorb the excess of homes on the market for foreclosure and newly constructed homes never sold.

 

It also would create new revenue for banks, local county tax collectors, insurance companies, housing contractors, realtors and local businesses in the areas where the homes were purchased.  The increases in revenue would generate a new tax basis for all the stated careers with the sales of the homes on the market.  The banks would increase their revenues which in turn generates more taxable income by the sales of these homes.  It would create a domino effect all across the business spectrum.

 

If this Act could be created the related economy would generate enough revenue to pay for itself through its incentives to the consumers and businesses by way of jobs created and income derived thereof.

 

Proposed HOUSING ACT PLAN:

 

This proposal is based on our current tax system and regulations.  It would allow the consumer to deduct the down payment on the purchase of a new or foreclosed home in the over abundant housing industry.

 

 

 

 

 

 

 

See following examples.

 

Example 1 Exhibit A.

 

John and Jane Doe purchase a foreclosed home that has been on the market for over 2 years.  The purchase price of the home is $150,000.00 and the bank requires a 15% down payment not including the closing costs involved in the purchase.  The down payment of $22,500.00 is required before the home can be financed.  The remaining balance of $127,500.00 would be financed for 30 years at 5.25%.

The taxpayers have an adjusted gross income of $76,300 before standard deduction and exemptions are taken.  Therefore the current mortgage interest deduction would not be substantial enough to take away from there AGI because their standard deduction would be greater. Since the down payment of the purchase would be substantially greater than the standard deduction it would allow the taxpayers to lower their taxable income by an additional estimated $11,800 after their exemptions were applied.

There would be stipulations to certain other taxpayers with lower incomes.  In this example the taxpayers would be left with an estimated $47,200 taxable income rather than an estimated $59,000 taxable income substantially lowering their tax liabilities giving them more disposable income for additional purchases or personal savings/investments such as retirement that becomes taxable upon distribution.

 

In the case of a taxpayer having a lower net income the deduction could be spread out over a period of 3-5 years by taking a percentage of the $22,500 over these 3-5 years.  In this example we could theoretically assume the following:

 

Example 1 Exhibit 1-A:

 

John and Jane Doe purchase a foreclosed home that has been on the market for over 2 years.  The purchase price of the home is $150,000.00 and the bank requires a 15% down payment not including the closing costs involved in the purchase.  The down payment of $22,500.00 is required before the home can be financed.  The remaining balance of $127,500.00 would be financed for 30 years at 5.25%.

The taxpayers have an adjusted gross income of $53,800 before standard deduction and exemptions are taken.  Therefore the current mortgage interest deduction would not be substantial enough to take away from there AGI because their standard deduction would be greater. Since the down payment of the purchase would be substantially greater than the standard deduction it would allow the taxpayers to lower their taxable income by an additional estimated $11,800 after their exemptions were applied.

In this particular case the taxpayer’s income would be lowered an additional 22% after the exemptions were applied.  Also, there would be federal tax withholdings that would be applied to the tax liability for the taxable income after the deduction for down payment and exemptions which resulting in the taxpayers having a greater tax refund assuming enough taxes were withheld from their paychecks/incomes.

 

 

 

Exhibit 1-B

If the taxpayers were in a lower tax basis or had no potential taxable income the deduction for the down payment could be amortized over the next 3-5 years when hopefully their incomes are greater.  We would then assume that allowing them to take a 20% deduction over a period of 5 years equaling an estimated $4,500 plus the standard deduction and exemptions deduction from their AGI therefore lowering their taxable income by an additional $4,500.  This would additionally allow the taxpayers to have more disposable income to save/invest and spend on other consumer products.

 

Exhibit 1-C

In a case where the taxpayers mentioned in these previous examples had substantially increased their taxable income but still not substantially enough to deduct the full down payment stated in Example 1 they would be allowed to deduct a larger percentage over a period of 3 years estimated at 33% for an estimated deduction of $7,500 plus standard deduction and exemptions deduction lowering their taxable income by an additional $7,500.

 

My informal polling, vis-à-vis, diversified clients, as well as potential buyers/sellers reveals positive acceptance by the public in general.  There is no loss of tax revenue.  Unoccupied foreclosed residences yield only deterioration and expanded renovation costs.  Primarily this potential ACT creates jobs, new revenue and that’s my objective.

 

I appreciate your attention and review of this proposal.  I look forward to your response and welcome any questions.  Please forward any questions or comments to me directly.

 

Respectfully,

 

Arthur J. Rich

Tax Accountant/Concept Development