A Stitch in Haste

Two activist legislators in New York seem to think so:

Assemblyman Keith Wright (D-Harlem) and state Sen. Diane Savino (D-Staten Island) announced Sunday that they have reintroduced The Renter's Tax Credit which would provide a $300 credit to individual renters who earn less than $43,000 a year and families who earn less than $75,000.
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"For too long, the renters of this city have long felt the sting of rising housing costs, because they don't qualify for any of the tax benefits that come with homeownership," she said yesterday.

Some hasty stitches:

--The proposed "renters rebate" mirrors the $300 property tax rebate that New York City homeowners receive. To which my response is: Two wrongs don't make a right.

--Isn't this a case of New York City elitism? Why shouldn't lower-income renters in Poughkeepsie, or Ithaca, or Binghamton, or Buffalo receive the credit too? Are they less important, or less worthy, than New York City's working class?

--If "rent is too high," then why craft a tax provision that encourages people to stay as renters? Shouldn't the policy, if there's going to be a policy, be to encourage renters to become owners instead? Would you give tax credits for cigarettes in order to enable lower-income smokers to afford nicotine patches?

--A related point, courtesy of introductory economics. If you instantaneously double everyone's income and wealth, then prices, for everything, will simply double (net of some background noise). The effect of a universal tax credit is not quite so dollar-for-dollar (due to demand elasticities and other factors), but the direction of the vector is the same: Give every lower-income renter an extra $300 per year, and they will simply bid up the price of their rentals. Perhaps not by $300 per year, but by some amount. This move would enrich landlords as well as renters -- perhaps more so. The laws of economics are not subject to repeal by any legislature.

--It may do little good to say it again, but the purpose of taxation ought to be to raise revenue, not to manipulate people's lives, reward them for "correct" behavior or penalize them for "incorrect" behavior. ("Correct" or "incorrect"? To whom? By what standard? Blank-out.)

These warm-fuzzy-feeling maneuvers are much like the person who, faced with a wobbly table, keeps sawing off too much of another leg, until there's no table left. While the obvious alternatives escape them:

1. Keep taxes low for everyone, and fairness will take care of itself.

2. Get out of the way, repeal all the various laws that making building in New York City next to impossible, and let real estate developers actually develop -- including housing. Demand creates its own supply -- except when government gets in the way.