Bill of the Day: A Tax Credit for People Who Pay Their Mortgages on Time

We will kick off this week with another look at a fun bill: H.R. 1317.

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And now on to the bill! H.R. 1317 would provide homeowners who make their mortgage payments on time for a year with a $5,000 tax credit. 

"It seems to me, and many of my constituents back home, that Congress is spending all of its time and energy rewarding those who acted irresponsibly," bill sponsor Rep. Bill Shuster (R-Penn.) said. " We must not ignore those who have played by the rules and lived within their means … Just because responsible homeowners are paying their mortgages on time doesn’t mean they don’t need help."

The tax credit is refundable. In other words, if it were to make a person's tax liability for a year negative, they would receive a refund from the federal.

Speaking about the program's scale, Shuster said, "It’s not a bailout, another taxpayer backed debt obligation, or a big government solution."

According to the U.S. Census Bureau's 2007 American Housing Survey (PDF warning), Americans collectively held about 49 million mortgages. Among those, only 33 million were the sole mortgages on the involved properties. Delinquencies recently hit a record-high of just under eight percent. 

So if we make the conservative estimate that only 80 percent of those 33 million mortgages are for principal residences (the only type eligible for the $5,000 tax credit), and we further assume that 15 percent of homeowners will become ineligible by being delinquent at some point within the next year, the approximate cost of the program is $112 billion a year.

By comparison, the Medicare prescription drug benefit cost $50 billion in 2007.

The bill has been referred to the House Ways and Means Committee and currently has 10 cosponsors, who include Democrats Christopher Carney (Penn.), Larry Kissell (N.C.) and Patrick Murphy (Penn.).

Is this tax credit a good idea or too expensive? Tell us what you think.