I Wish I Weren't Able To Do Basic Math

I'm just about through with media again. There's really only so much I can take before I have to go cold turkey to preserve what little faith in humans I still have. Sometime you just gotta block it all out.

Back and forth on this stimulus bill is what's got me really annoyed at the moment. And since I can't read yet another short essay proving just how little economics people know, I decided to actually dust off those critical thinking and research skills I supposedly use professionally each day.

Yep, I actually read the text of the housing tax credit amendment. Then I did some math. And then I sent my thoughts to Nick, who did yet more math (see how this math thing spreads like a disease, reproducing itself as it travels via social networks? Dastardly stuff!).

The interesting thing you might notice, if you look closely, is that this is a stimulus designed to deliver to biggest bang to the upper middle class. Everyone is shouting $15,000, but no one wants to mention the 10%. This is really easy math here: a 10% credit that tops out at $15,000 means that the benefit not only stops at the first $150,000 in the home price, but it also delivers less than 15 grand for houses that cost less than $150,000.

And then there's the tax credit part. This baby isn't a refund. And you can only stretch it out over 2 years. So if you don't pay at least $7500 in federal income taxes each year, it doesn't matter how expensive a home you bought.

I don't think I know a single apartment dweller (aka potential homebuyer) who pays more than $7500 in income taxes to the fed in a year. They must all live in Manhattan.

So, for a single person earning $40,000 gross, you'll have to subtract the standard deduction, medicare/social security payments, 401k contributions and student loan interest (and any other deductions they may have). That leaves a taxable income level that pushes your home purchase tax rebate to less than $4,500 each year. Nick calculated that a married couple would have to earn more than $55,000 in TAXABLE income to receive the full benefit. That implies either a pretty sizable paycheck, or a couple who are so behind on their retirement contributions that they should put any tax rebate money they get into cat food futures.

When they roll out things like this for the "middle class," I start to wonder how many people I know who are actually IN the middle class. Oh well, at least this provision isn't alone. It can sit right next to the mortgage interest deduction as one of those things that middle class people can't live without even though they don't have enough money to actually use them.