Just got back from Drinking Liberally, where one of my fellow drinkers pointed out that the Senate is following in the footsteps of the Groton Town Council by incentivizing past behavior. You may recall that the town of Groton gave a hotel developer a tax break as an incentive to build a hotel it had already built. Today the Senate gave homebuilders a tax break that rewards them for past behavior, but gives precious little incentive for future economic activity:
In addition, [the bill] would … provide a new tax break for struggling home builders, allowing them to claim current losses against taxes paid in earlier, more profitable years. Officials said the proposals would cost taxpayers $15 billion to $20 billion, with details still being worked out.
Now, it’s certainly possible that some of these homebuilders will use that money to build more houses, generate more jobs, etc. It’s also possible that a lot of them will simply pocket the money and run. If the bill allowed them to take a credit in future years it would cost the same or less, but the taxpayers would be shelling out the money only to homebuilders that were contributing toward pulling us out of the mess we’re in. This tax break merely rewards the folks who made piles of money (you need to have made a profit in order to take advantage of this tax break) as part of the system that got us into the mess.
I’m not advocating for this alternative, I’m only saying allowing a carryover makes more sense. Neither tax break is a particularly good idea.
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