Changes to First Time Buyer Tax Credit

Here is a simplified chart showing the changes to the first time home buyer tax credit.

Stimulus Package

Well, we are still waiting for the final details on the stimulus package, but it appears that the "First Time Homebuyer" tax credit will become part of teh final bill. It will not be as bold as first expected, but still a very important step in getting buyers (you) to get active inyour home buying process.

We think it will wind up being a 10%, up to $8000, tax credit for home bought between 12/21/08 - 12/31/09. And the important part is that it will not have to be repaid.

Of course, there may still be other tax implications, but on the surface this appears to be a great tool for home buyers. A first time buyer is defined as anyone that has either never ownerd a home (duh!), or one that has not owned a home as a primary residence on the last three consecutive years. The last draft I read was still a little blurry on whether owning a rental home still allowed for first time status and I will be watching for that, along with other details and pass it along.

Another great news item for the greater San Antonio area is that USAA is bringing 1000 jobs here from other locations! Of course, many will be local hire, but also many new arrivals. Ths will allow more homes to be sold and give the seller market a boost.

Taxes and Economic Growth

I found this and want to share it. It comes from David R. Kamerschen, Ph.D. Professor of Economics, University of Georgia

Bar Stool Economics Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing. The fifth would pay $1. The sixth would pay $3. The seventh would pay $7. The eighth would pay $12. The ninth would pay $18. The tenth man (the richest) would pay $59. So, that's what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve.
"Since you are all such good customers, he said, "I'm going to reduce the cost of your daily beer by $20." Drinks for the ten now cost just $80. The group still wanted to pay their bill the way we pay our taxes So the first four men were unaffected. They would still drink for free.
But what about the other six men - the paying customers? How could they divide the $20 windfall so that everyone would get his "fair share?" They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer.
So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.
And so: The fifth man, like the first four, now paid nothing (100% savings). The sixth now paid $2 instead of $3 (33%savings). The seventh now pay $5 instead of $7 (28%savings). The eighth now paid $9 instead of $12 (25% savings). The ninth now paid $14 instead of $18 (22% savings). The tenth now paid $50 instead of $59 (15% savings). Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.
"I only got a dollar out of the $20," declared the sixth man. He pointed to the tenth man, "but he got $9!" "Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got nine times more than I!" "That's true!!" shouted the seventh man. "Why should he get $9 back when I got only two? The wealthy get all the breaks!" "Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor." The nine men surrounded the tenth and beat him up. The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!
And that, boys and girls, journalists, and college professors, is how our tax system works.

The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.



For those who understand, no explanation is needed. For those who do not understand, no explanation is possible!