Senate Passes Unemployment Insurance Extension With Home Buyer Tax Credit

November 5, 2009 7:49 a.m. EST

Washington, D.C. (AHN) - The Senate approved an extension of jobless benefits late Wednesday, sending the bill back to the House for final vote that may be held on Thursday. The measure includes an expansion of first-time home buyer tax credit that was set to expire at the end of the month.

The bill passed by a vote of 98-0 after weeks of debate between Democrats and Republicans over amendments. The measure was previously passed by the House without amendments in September by a vote of 331-83, and needs final approval by the chamber before being sent to President Barack Obama to be signed into law.

The legislation gives 14 more weeks of benefits to the nation's jobless, states with unemployment rates of 8.5 percent or higher get an additional six weeks. The bill would cost $2.4 billion, and will be paid for with an extension of the federal unemployment tax (FUTA), which proponents have pointed out the Bush administration had proposed extending last year.

Nationwide unemployment rose to a 26-year high of 9.8 percent last month. The losses added 7.6 million to the number of unemployed since the recession began in December 2007, putting the total to 15.1 million.

A million Americans are expected to run out of unemployment insurance benefits at the end of the year.

House Republicans had warned that the bill would extend benefits for a period totaling nearly two full years, giving credence to "the concerns of noted economist Martin Feldstein, who previously testified that extended unemployment would 'create undesirable incentives for individuals to delay returning to work. That would lower earnings and total spending.' "

In the Senate, Republicans had blocked the bill and accused Democrats of not allowing any of their proposed amendments, including one seeking to prevent any assistance to the Association of Community Organizations for Reform Now (ACORN), which was prohibited several weeks ago from receiving any federal funds by lawmakers and other government agencies because of undercover videos showing some of its workers giving what appear to be illegal advice.

But Senate Majority Leader Harry Reid (D-NV) said in a statement before the vote, "After working over three weeks to provide this critical aid to Americans who are out of work, it is unconscionable that Republicans are continuing to delay this much needed financial assistance that will help families pay their bills.

The legislation has a measure attached to it that extends and expands an $8,000 tax credit for first-time home buyers that is due to expire on Dec. 1.

The National Association of Realtors had been pushing hard to extend the credit, as well as include non-first-time home buyers, saying the legislation has helped stabilize the housing market and raise sales, projected at to 5.1 million for the year.

The attached measure extends the credit until April 30, 2010, and provides $6,500 tax credit to include buyers who "move up" or "trade-in" their home for a better one, so long as the house they lived for at least five years in the house they are leaving.

Buyers with higher incomes can now qualify for either credit, with the earnings cap amended to $125,000 for an individual or $225,000 for a couple. The original bill phased out the $8,000 tax credit to individuals earning between $75,000 and $95,000, or $150,000 and $170,000 for couples.

The measure retains its limit to homes purchased for up to $800,000. Provisions strengthening the authority of the IRS to oversee the processing of credits have also been included in light of reports of rising fraudulent claims. A HUD-1 settlement statement will now be required when claiming credits.

"Tax credits like this only work by creating the sense of urgency to take advantage of them," Sen. Johnny Isakson (R-GA), the measure's main sponsor, said in a statement. "This is the last extension of the home buyer tax credit, and I urge all Americans whether they're first-time buyers who've always dreamed of having a home of their own or someone who's been gridlocked in the failure of our move-up market to take advantage of this opportunity."