By Kevin McArdle- NJ101.5 FM- August 11, 2010

In the spring, the full legislature in bi-partisan fashion passes a bill to create a homebuyers tax credit in New Jersey. Nearly three weeks ago, Governor Chris Christie vetoed the legislation. The measure's sponsor is hoping that a full explanation of how the credit would really work could lead to the possibility of a veto override.

In vetoing the Greenwald's bill and two others, Christie noted that the State of New Jersey continues to confront historic economic and fiscal crises and that these bills add $132 million in State spending that was not accounted for in the Budget nor envisioned as part of the bipartisan agreement on a spending plan. Christie wrote in the veto message to the Legislature, "state spending has been reset to levels the taxpayers can afford and supplemental spending that would return to the unchecked spending and out of control budget shortfalls of the past will not make it past the Governor's desk."

"So, basically his emphasis for vetoing this is that he doesn't believe it will create jobs, that we don't have the money and that the money will be utilized by an existing inventory that's already been created," insists Greenwald. "To the fact that this will not create jobs, it shows an alarming misunderstanding of how the tax credit works.

The Assemblyman explains, "A developer, an investor, a home builder is going to decide that there is a demand and a market need for housing. And they're going to invest in New Jersey. And their going to put bricks and mortar, sticks and bricks, up in this state. And they will build a home and when they do that, they're going to go to carpenters, electricians, plumbers and pipefitters - of which 40% are currently unemployed in the State of New Jersey. And when they employ those building trades and they put those people to work and they take them off the unemployment line, those people will go to work and collect an income and they will pay an income tax."

Greenwald says when those people go to work and they start putting up the foundation of a home, the next step will be that we will have to - as builders and developers - the State of New Jersey will reach out to the venders that supply the carpets, the staircases, the tiles, the roof shingles, the siding for a home, the asphalt driveway, the landscaping and we will start to acquire those goods and pay sales taxes on those goods.

"So as now, the state starts to collect a sales tax revenue, at that point, still, not a single penny - not one penny - of the homebuyers tax credit has gone out," says Greenwald. "Not one penny……. So now you have income tax and you have sales tax revenue going on and you will now, hopefully, as has been done in the past, stimulate the buying market and people will buy. And if and when they buy, that is when the state will pay its first penny of the housing tax credit."

Jeff Otteau, the President of the Otteau Valuation Group, says the tax credit measure "is of vital importance to the housing market, and the New Jersey economy, given that since the expiration of the federal homebuyer tax credit - which had a deadline of April 30th - home sales in the state have plunged."

Otteau points out home sales fell 23 percent in May, and 27 percent in June - which a normally a very active time of year for the housing market…and home construction numbers have also plummeted.

He says without the homebuyer tax credit program - or some other stimulus in the housing market - "it appears that we are headed for a double-dip in home prices, which in turn, will pass through into the larger economy."

Otteau adds the credit would definitely result in additional economic activity in Jersey because "when people buy homes, they typically go out and make substantial retail purchases, home furniture, decorating, carpets…and tax revenues would also be generated, both in terms of retail spending sales tax as well as the employment taxes that result from the construction jobs that get created…we have to keep in mind that the economy is 70 percent consumer driven - and housing sales are the primary driver of consumer spending."

Greenwald's bill, as amended, would have established the New Jersey Homebuyer Tax Credit Program under the New Jersey gross income tax. To qualify for the credit a taxpayer would have to enter into a contract of sale on a qualified home purchase within the one year following the bill's date of enactment. For qualifying new home purchases a taxpayer would have 18 months from the contract of sale in which to complete the purchase. For qualifying previously occupied homes a taxpayer would have 12 months from the contract of sale in which to complete the purchase.

The tax credit provided by the bill would be refundable and allowed for up to $15,000 or 5% of the purchase price, whichever is less. The total credits available would be capped at $100 million, with $75 million allocated for purchases of newly constructed homes not previously occupied and $25 million allocated for purchases of previously occupied homes. The credit would be provided on a first come, first serve basis and the claiming of the credit for personal income tax filing purposes would be divided into three equal credit amounts claimed over three taxable years. The terms of the credit require that the home continue to be occupied as the taxpayer's principle residence for three years.

Greenwald says the measure is intended to create a substantial and immediate incentive for potential homebuyers. Recognizing that much direct and indirect economic activity is generated through new home construction and home resales, this incentive could not only to reignite the recession-struck homebuilding industry in this State, but also stimulate economic growth through indirect related spending, including boosting State and local government revenue collections generated by this activity.