“Together we will bring California’s economy roaring back out of this recession.” – Governor Schwarzenegger, weekly radio address, March 26.
In the midst of what some are calling the second worst economic downturn since the Great Depression, California lawmakers have moved to do something that is supported across the aisles. On Thursday, March 25, Governor Schwarzenegger signed into law Assembly Bill 183. AB 183 grants an income tax credit of up to $10,000 for approved first-time home buyers. The bill “authorize a credit… equal to the lesser of 5% of the purchase price of a qualified principal residence, as defined, or $10,000” on all first-time home purchases completed between May of 2010 and August 1, 2011.
Up to $200,000,000 is potentially up for grabs. Half of that amount is set aside for buyers of brand new homes and the second half is for those first-time buyers who decide to purchase homes which have been previously occupied. In his weekly radio address on Friday, March 26, the governor called this bill not only a tool for tax relief, but “another job creation bill.” Schwarzenegger hopes that this bill will go toward rebuilding the economy, explaining that “if you sell more homes, then you have to build more homes, and when you build more homes, it has a domino effect.”
The governor graciously thanked California legislators for passing “this great legislation” because they put their differences aside and worked hard. “You see, when Democrats and Republicans work together, they can do great things… So I want to thank the Democrats and the Republicans for the great work they did this week.”
This is great news for those considering either a move to California or moving out of an older home. Though it may seem counterintuitive to move to heavily-taxed California during a period of economic woe, a significant tax cut, particularly one directly correlated to primary home ownership, could be a step in the right direction for a state which has received heavy criticism for its tax levies for far too long. High taxes, coupled with 12.5% unemployment, are never positive for politicians, so for some, the bill’s signing came just in the nick of time.
Back in January, I applauded the governor’s move to once more incentivize home and business purchase in California, through the ambitious California Jobs Initiative. By embracing a bipartisan piece of legislation, both the governor and state representatives have signaled agreement that the state’s economy is in trouble, and it’s time to get serious.
The generous tax break must be certified and evidence must be presented to the state Franchise Tax Board that a home has never been purchased in the buyer’s name before. Like the 2009 version of the tax credit, this credit will also run on a first come, first served basis, though it is hoped that this time, the $200,000,000 will last for longer than just a handful of months.
This legislation will give the FTB the power to grant hundreds of millions of dollars in tax breaks, but in California, any tax break is a welcome one these days.