In a move that should receive accolades from the tax justice community, New Jersey Governor Chris Christie recently vetoed legislation that would have put into place a tax credit for homebuyers. The legislation would have allowed tax credits of up to $15,000, or 5 percent of the home purchase price (whichever is less) for buyers of new or existing homes. The tax credit would have been available to anyone buying a new or existing home and no income caps would have applied.
The Governor said he vetoed the legislation because "the state simply can't afford it." The credit would have cost the state an estimated $100 million. The Governor expects that the state has a long road ahead in terms of fiscal solvency, saying that the state will "face long-standing, structural difficulties in its finances that require continued fiscal restraint and additional reforms." In his veto message he said, "This legislation will only briefly and artificially inflate home sales and consequently does not merit a $100 million revenue loss to the general fund."
A homebuyer's tax credit is poor policy at the state level just as it is at the federal level. As Citizens for Tax Justice noted during the debate over the federal credit, one problem with a tax incentive of this sort is that it goes to people who would have engaged in whatever activity Congress is trying to encourage (in this case, home purchases) even if the tax incentive was not available. And even if the homebuyer tax credit does prod some people to buy homes who otherwise would not, why is that something Congress wants to encourage? Isn’t over-consumption of housing, and the hugely inflated housing prices that resulted, what caused the recession?