Lawmakers seek to extend $8,000 tax credit

Hoping to keep the precarious economic recovery on track, the Senate is considering a plan to extend and expand a stimulus-package provision giving first-time homebuyers an $8,000 federal tax credit.

One idea now being discussed is to combine the homebuyers' credit with legislation, strongly backed by the Obama administration, to extend federal assistance to the millions of people in danger of exhausting their unemployment insurance benefits. That bill is likely to reach the Senate floor next week.

While the White House says there will not be a second stimulus package following the $787 billion economy booster enacted last February, extending the homebuyers' credit and unemployment benefits are among several primary means being pushed to help people get through the prolonged economic downturn.

Others include continued subsidies for laid-off workers trying to keep their health insurance and a proposal by President Barack Obama to provide seniors and others with a $250 payment to make up for the lack of a Social Security cost of living increase next year.

"There is a point in time when we owe it to our country, we owe it to our economy, we owe it to mainstream America, where we know we have a proven program that works, to extend it and buoy the marketplace," said Sen. Johnny Isakson, R-Ga., who is sponsoring a homebuyers' credit extension with Senate Banking Committee Chairman Christopher Dodd, D-Conn.

The stimulus-package credit allows first-time homebuyers to reduce their federal income taxes by 10 percent of the price of a home, up to a maximum of $8,000. It is set to expire Dec. 1.

The Isakson-Dodd proposal would extend the credit to June 30, 2010. It would also remove the first-time homebuyer requirement and raise the eligibility income limit to $150,000, or $300,000 for a couple.

The senators are trying to attach their proposal as an amendment to a Senate bill that would extend unemployment insurance benefits for the nearly 2 million jobless workers who are due to exhaust their benefits by the end of the year.

That bill would give an additional 14 weeks of benefits to jobless workers in all 50 states, and another six weeks on top of that to people in the 27 states where the unemployment rate is at or above 8.5 percent. The national unemployment rate is 9.8 percent.

Senate Democratic leaders have not decided whether the homeowners' credit issue should be part of the unemployment bill. But there is powerful backing for taking it up in some form.

House Speaker Nancy Pelosi, D-San Francisco, said last week that she is looking into extending and expanding the popular tax credit, which according to IRS data has drawn more than 1.4 million applications from first-time homebuyers for houses in 2008 and 2009.

One possible obstacle to the more ambitious Isakson-Dodd approach is the cost, about $16.7 billion according to the Joint Committee on Tax.