Wisconsin Estate Planning and Tax Law Blog

Widespread Fraud and Abuse of First Time Home Buyer Tax Credit

This item can probably best be filed under the category, "News We Expected."  As reported by the Wall Street Journal online in "Tax Credit Abuse and the Four-Year-Old Home Buyer" the Inspector General for Tax Administration, Russell George, testified before Congress today in regards to fraud and potential abuse of the home buyer tax credit.  Mr. George testimony comes at a time when the current home buyer tax credit is set to expire in less than 6 six at the end of November and with the real estate lobby pushing for an extension.

It would be fairly naive in my opinion to not anticipate that some individuals would commit tax fraud or intentional abuse the system.  I am certainly not condoning the illegal activity better known as tax fraud or tax evasion.  Reading articles highlighting fraud and abuse such as this reinforces in my mind the truism, "One bad apple spoils the barrel," except that a number of the apples in this barrel are bad, which will only hasten the spoilage of the first time home buyer tax credit.

U.S. News and World Report also published an online article titled "First-Time Home Buyer Tax Credit: All Sorts of Sketchy Claims" that discusses the fraud and abuse news as well as five things to know about the development.

The Other Shoe Has Dropped on Executive Pay

The Obama Administration pay czar, Kenneth Feinberg, has made it known that he will require each of the seven largest bailout recipients to reduce the total compensation for their top 25 highest paid employees by 50%, on average.   These rules affect the likes of AIG, Citigroup, and Bank of America. The New York Times article, "Curbing Wall Street Pay, and the Corporate Boards that Set it," provides additonal overview and commentary on the topic.

It will be interesting to see how this news is received in the various circles.  Wall Street will certainly exhibit a reaction.  Politicians will spin it in a way most favorable to them and their platform.  Individuals?  Well, I am not sure how we the people will respond.  I see two main reactions.  The first is that this is exactly what the government needed to do to keep the greedy business executives in line.  The second is that this is a classic case of government overstepping its boundaries in a free, capitalist economy.  Which one is right?  Probably neither, but we live in a polarized world where the "happy medium" is not an option.