Michigan Legislature Approves Taxpayer-Funded Subsidies For Affluent Home Buyers
Fiscal agency reports the money will flow to people who likely don’t really need it
First time home buyers could get a state-income-tax exemption of up to $10,000 for couples and $5,000 for an individual - if they have that much to deposit in special "first time home buyer" bank account - and they don't even have to really be a "first time" homeowner or buyer.
The so-called "first time home buyer" tax credit is available to anyone who has not bought a home within the past three years and do not currently own a home.
According to nonpartisan fiscal analysts who work for the legislature, the two bills authorizing the tax subsidies - which are now awaiting Gov. Gretchen Whitmer’s signature after quickly attracting bipartisan majorities in the House and Senate - appear more designed to help affluent home buyers, not lower or middle income people.
For a limited time only, House Bill 4290 and Senate Bill 145 propose giving individuals who have not purchased a home in the last three years – dubbed “first time home buyers” – a state income tax credit worth up to $5,000 per year, $10,000 for joint filers for up to five years in a row. The tax break provision the bill would enact is also set to expire in five years time
The Michigan Senate Fiscal Agency described the legislation’s likely effect on future state revenue as follows:
“The temporary nature of the deduction, which would be available only through tax years 2022 to 2026, also could reduce participation, especially for taxpayers that would require a longer period of time to save for a down payment.
"The short window for the deduction suggests that the majority of participants likely would be individuals who could afford, absent the bill, to make meaningful progress on saving for a down payment over a short period of time. Even if longer-term savers participated, the sunset on the deduction would reduce the tax incentive to participate in the program.
"For example, if a taxpayer intended to save for 10 years toward a $20,000 down payment (roughly 10% of the average 2020 sale price) at $2,000 per year, the sunset would halve the tax incentive from the program.”
The two-bill package included Senate Bill 145, sponsored by Republican Sen. Ken Horn, and House Bill 4290, sponsored by Democratic Rep. Mari Manoogian. The House passed both bills 86-18, the Senate passed both unanimously.
In 2018 the House and Senate passed sent a version of this proposal to Republican Gov. Rick Snyder, who vetoed it.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.