How Economic Policy is Made by Congress (worse than sausage making)

From CalculatedRisk on 3/15/2010. Home Builders $2.3 Billion “Gift” from Taxpayers

Last year, included in the “Worker, Homeownership and Business Assistance Act of 2009” that extended the popular unemployment benefits were two unpopular and ineffective tax credits: the home buyer tax credit, and a net operating loss carryback extension to allow businesses to write off current losses against profits up to 5 years ago – the profitable years for home builders.

From Zach Fox at SNL Financial has an update on the carryback: Builders record $2.30B in tax benefits

Zach has much more on the home builders, and here are some comments from Chris Thornberg on the effectiveness of the tax credit:

…As Thornberg notes, the only reason for a tax provision like this is to spur construction – something we don’t need right now. It would be better if there was less capacity in the home building sector.

One thing is certain, the Return on Lobbying (ROL) for the home builders was awesome, as Gretchen Morgenson noted in the NY Times last year: Home Builders (You Heard That Right) Get a Gift

The Center for Responsive Politics reports that through Oct. 26 of this year, home builders paid $6 million to their lobbyists. … Much of this year’s lobbying expenditures were focused on arguing for the tax loss carry-forward, documents show.

Among individual companies, Lennar spent $240,000 lobbying while companies affiliated with Hovnanian Enterprises spent $222,000. Pulte Homes spent $210,000 this year.

That’s some return on investment. After spending its $210,000, Pulte will receive $450 million in refunds. And Hovnanian, after spending its $222,000, will get as much as $275 million.