Corporate Welfare for Homebuilders?

So much for change.

The WSJ reported last evening that President Obama’s new budget includes a big payoff for large businesses including the home builders.

As part of its $3.6 trillion budget blueprint unveiled last week, the administration proposed allowing large businesses to use recent tax losses to offset taxable profits earned in the past, and reap sizable cash refunds. Typically, companies can carry back such losses only two years, but the White House is considering extending that to five years.

Big home builders have lobbied for an expansion of this tax break for nearly a year and appeared close to getting it in the $787 billion economic-stimulus plan. But at the last minute, Congress limited the five-year carry-back provision to firms with annual gross receipts of $15 million or less.

Analysts and some small builders worry the provision could prompt large builders to sell land or homes at steep discounts to generate losses for tax purposes, as companies such as D.R. Horton Inc. (DHI) and Pulte Homes Inc. (PHM) have done in recent months. A big labor union and other criticis have argued against the break, saying it would help the very builders that contributed to the housing crisis.

If the version in the Obama budget is enacted, the break is projected to trim federal revenue by about $18.5 billion over the next 11 years, according to the White House Office of Management and Budget. The tax break was dropped from the stimulus plan as part of an effort to lower the package’s cost to the Treasury, to appease Republican and Democratic centrists. Now that cost could be realized in the budget instead.

Other than trying to pump federal funds into companies, there is little reason for this tax break. It is corporate welfare at its worst. The fact that it took this long for some one to ferret it out belies the Obama camp’s claim to transparency and honesty in the budget process.

At a point in time in which we need to be devoting strained resources towards digging ourselves out of this mess, this sort of gift to a narrow slice of the population is unconscionable. It’s nothing more than Washington business as usual. Give a huge amount of money to a small constituency and expect some to flow back to your campaign coffers.

Come on Barack. Walk the walk.

Comments

[Michael Shu...:]

The larger issue -- why do we need national home builders? The don't export, they actually use less labor than local contractors, their previous access to cheaper credit led to speculation and they are in part to blame for the housing crisis. Simply put, national home builders do nothing for the economy that cannot be replaced by local contractors much more in touch with local conditions and local banks. Notice the word local. That being said, if they go bankrupt, their assets will be dumped on the market even faster than if they receive this tax rebate.

Mar 06 12:38 PM

[Yohei:]

We have seen a lot of bursting bubbles. Perhaps we will be fortunate and the Obama bubble will soon burst.

The bursting of the Obama bubble is a necessary step in fixing this mess.

Mar 06 02:58 PM

[silverfox:]

As a Canadian i have been reading many articles on Obama bashing.
I like to ask myself one question before i criticize anyone.
Quite simply would i be able to do a better job given the circumstances he was handed.
If the answer to that is yes than fill your boots and keep criticizing, however some constructive alternatives would be greatly appreciated and maybe you could become the next President of the United States.

Mar 07 11:08 AM

[varmet:]

We need to clean house to fix this mess. Propping up the companies,financial institutions and elected officials that created this crisis
only prolongs the pain and stands in the way of the serious fundamental
changes that need to be made in America.

Clearly being a consumer and debt driven economy does not work.
How many more time must we hear, "once we get credit flowing and housing fixed we're on the road to recovery"?

America better learn real fast that it needs to be a producer nation. We need health and workers compensation reform as well as tax and tort reform.

With out changes in these areas American companies will remain at a huge disadvantage in the worlds market place.

Mar 07 12:09 PM

[Presence:]

Do you have any idea what you are talking about? Do you have any factual data to support your claims? Do you know how the building industry works? Do you understand national builders do extensive research about local communities before building? Do you know that national builders also utilize local contractors to build their homes? Do you know that the national builders are capable of assuring much greater quality than local contractors because they receive on the job experience as well as classroom training on how to build homes? Do you know that national builders have the resources to drive improvements in the technology of building which makes us feel better about our location? Did you know that national builders often rely on local lenders and banks to help finance their buyers? I get the feeling that you have no clue how "local" a national builder can be.


On Mar 06 12:38 PM MICHAEL SHULMAN wrote:

> The larger issue -- why do we need national home builders? The don't
> export, they actually use less labor than local contractors, their
> previous access to cheaper credit led to speculation and they are
> in part to blame for the housing crisis. Simply put, national home
> builders do nothing for the economy that cannot be replaced by local
> contractors much more in touch with local conditions and local banks.
> Notice the word local. That being said, if they go bankrupt, their
> assets will be dumped on the market even faster than if they receive
> this tax rebate.

Mar 18 05:10 PM

[Greg Weston:]

This comes a bit late, but I greatly enjoyed this article, keep up the good work.

Apr 28 10:28 AM