Government efforts to stimulate the economy and prevent the recession from being as deep as it could have been have met with mixed results and that’s not a big surprise. When you spend $787 Billion on so many different programs you will have some that work, others that are so-so and some that are complete flops.
One popular program has been the $8,000 tax credit for first-time homebuyers. This is a program that made a lot of sense in that the real estate market has borne the brunt of the pain in the downturn. A program that helps to revive that sector of the economy, despite its flaws, has to help. Although it is due to expire in a month, there is a push to extend it in some form.?
Cash for Duffers?
The auto industry is another that has suffered greatly. Manufactures, parts suppliers, dealerships and their employees have suffered a lot of pain. The city of Detroit is experiencing the nation’s highest unemployment rate in large part because of job losses at automotive manufacturing plants. That was the driving force behind the creation of the Cash for Clunkers program. Whether you liked the program or not, it did stimulate sales in that sector for a short time.
Apparently the Government must have felt that golfers needed a stimulus of their own. I first noticed newspaper display ads for electric golf carts popping up a few weeks ago. What caught my eye was the mention of a Federal Tax Credit of up to $5,500. The ad stated that you could purchase an $8,000 golf cart for less than $2,700 after the credit. Is this supposed to somehow stimulate the economy?
It gets worse, or better, depending on how you look at it. Some states offer a tax credit in addition to the Federal one, which can essentially make the golf cart entirely free. An online search revealed that Oklahoma is one of the states (article). Apparently the IRS, in its infinite wisdom, not only ruled that golf carts qualify as electric vehicles and are eligible for the credit (article), they also declared that there is no limit to the number of carts an individual can buy.
A New Strategy
So why invest in real estate with all its inherent headaches and risk? Instead buy golf carts. When the Federal program ends you can turn around and sell the carts at prices below what dealers can offer. If you live in a state that provides a credit that makes the cart free whatever you sell the cart for is pure profit. That seems a lot less risky than flipping real estate.
Of course, if enough people employ this strategy many golf cart dealers will be driven out of business because they can’t compete. Another Government program and its unintended consequences, what a beautiful thing!
Democracy is the art and science of running the circus from the monkey cage. – H.L. Mencken