Tax Cut for Home-Buyers Raises Cost of Stimulus Bill
"It is time to fix housing first," Sen. Johnny Isakson, R-Ga., said Wednesday night as the Senate agreed without controversy to add the new tax break to the stimulus measure, at an estimated cost of nearly $19 billion.
The tax break was the most notable attempt to date to add help for the crippled housing industry and gave Republicans a victory as they work to remake the legislation more to their liking.
Democratic leaders hope for Senate passage of the legislation by Friday at the latest, although prospects appear to hinge on crafting a series of spending reductions that would make the bill more palatable to centrists in both parties.
Three swing-vote senators met with President Barack Obama at the White House on Wednesday to discuss possible cutbacks, but they declined to discuss details of their talks. Obama has made the legislation a cornerstone of his recovery plan.
For their part, Senate Republicans signaled they would persist in their efforts to reduce spending in the measure, to add tax cuts and reduce the cost of mortgages for millions of homeowners.
Officials figures were unavailable, but it appeared that the measure carried a price tag of more than $920 billion, making it bigger than the financial industry bailout that passed last year and as large as any measure in memory.
Despite bipartisan concerns about the cost, Republicans failed in a series of attempts on Wednesday to cut back the bill's size.
The most sweeping proposal, advanced by Sen. Jim DeMint, R-S.C., would have eliminated all the spending and replaced it with a series of tax cuts. It was defeated 61-36.
Democrats also upheld a so-called Buy American provision that requires projects financed by the measure to be built with domestically produced iron and steel.
But with Obama voicing concern about the provision, the requirement was changed to specify that U.S. international trade agreements not to be violated.
Additionally, Democrats turned back an attempt to strip out a provision that Obama has said was essential. It would provide a tax cut of up to $1,000 for working couples, including those who do not make enough to pay income taxes.
Isakson said the new tax break for homebuyers was intended to help revive the housing industry, which has virtually collapsed in the wake of a credit crisis that began last fall.
The proposal would allow a tax credit of 10 percent of the value of new or existing residences, up to a $15,000 limit. Current law provides for a $7,500 tax break but only for first-time homebuyers.
Isakson's office said the proposal would cost the government an estimated $19 billion.
The provision was the second tax cut approved in as many days targeted to individual industries. On Tuesday, the Senate voted to give a break to consumers who buy new cars.
The House approved its own version of the bill last week.