Friday, February 6, 2009

Politicians Wanted - Math Skills Not Required.

Apparently math is not a required subject for politicians. As this post points out, even the most basic back-of-the-lobbyists-cocktail napkin calculation shows a price that's almost 4x higher than the number's being thrown around.

"Somehow, Isakson puts the cost of his tax break at just $19 billion. Let's break the Washington rules and try a little arithmetic. Even with weakness in the housing market, it is still virtually certain that we will sell close to 5 million homes in 2009. The overwhelming majority would qualify for the full credit. So, we get 5 million times $15,000. That sounds a lot like $75 billion."
Even if we assume the average house is only worth $100k, so the average credit will be $10k, that's still $50B not $19B.

Seriously, how do we let these people "represent" us? If the credit will work, fine, but let's put a real price on it not some made up number.

If anyone has any insights into their calculations I'd love to see them.

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Anonymous said...

First, I enjoy your blog very much, keep up the posting.

I cannot find any information on the proposal but it may be a credit against taxes owed and be an estimate of the people that will use the credit and what they owe in federal taxes. Not sure, but good math sometimes goes beyond the obvious.

bwd said...

One possible answer would be that non-owner occupied sales would not qualify for the tax credit. In some markets which appear to be hitting bottom a high number of sales are non-owner occupied which are being purchased by investors as rentals (since they cash flow at a return acceptable to the investors). The $19 billion dollar estimate still seems quite low even factoring in the non-owner occupied sales.

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