The more I think about the First Time Home Buyer Tax Credit, the less I like the program. In one previous post, I concluded that the credit was not creating new buyers as promised, but only borrowing from future sales.

In other words, we are paying for purchases that would have taken place without the incentive. One analysis suggests that 4 out of 5 tax credit recipients would have purchased anyway. This means that each new buyer costs the Treasury $40,000.

In another previous post, I suggested an alternative to the tax credit, which my numbers indicate would cost less, help more, and better target need. This alternative might also help revitalize the MI industry, which was hit as hard as any by the financial crash.

This alternative involves an MI risk subsidy for $8,000.

Today though I am writing about another reason NOT to extent the First Time Home Buyer Tax Credit - TAX FRAUD.

Already, just with tax year 2008, tax fraud associated with the First Time Home Buyer Tax Credit has been rampant.

• 19,000 claims for the credit did not actually purchase a new home
• 74,000 claims for the credit have previously owned a home

So, in addition to not being effective and to having a very high cost, the tax credit is leading to a significant amount of tax fraud and questions are being raised as to whether the program is being managed well.