From Realtor Magazine Online, Daily Real Estate News December 19, 2008
Some economists are blaming the housing bubble on the tax break that passed in 1997, removing taxes on most home sales.
This tax treatment encouraged people to put more money into real estate because it could be a tax-free windfall. A recent study by the Federal Reserve found that 17 percent of the increase in home sales over the last decade is attributable to this tax change.
Vernon L. Smith, a Nobel laureate and economics professor at George Mason University, has said the tax law change was responsible for ''fueling the mother of all housing bubbles.
''The law’s defenders say that it removed a tax incentive that pushed home owners to trade up because before 1997, people had to buy a house at a price that was at least as high as the cost of their previous home to avoid capital gains taxes. Now they can sell and buy a smaller property or rent.
Source: The New York Times, Vikas Bajaj and David Leonhardt (12/19/08)
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