Federal Subsidy Recapture
To understand what a federal subsidy recapture is, we first gotta look at the lay of the federal mortgage subsidy land. People can apply for and receive a federal subsidy to buy a house under certain conditions.
For instance, a homebuyer might be eligible for a mortgage credit certificate with a mortgage loan, or may get a mortgage at a super low interest rate because it was funded via a qualified mortgage bond, which is tax-exempt. People who get these are getting a federal mortgage subsidy.
When a federal subsidy is “recaptured,” it means the part of the mortgage that was funded by the federal government must be repaid and “given back,” which happens when the home is sold (or, abandoned) within nine years of getting that federally subsidized home loan. A federal subsidy recapture isn’t needed if you sell the house nine years later.
How does the government get its money back? Through increased federal income taxes the year the house is sold, for whoever the house seller is. Gotta make it past that nine year itch with the house to avoid a tax hike.
Related or Semi-related Video
Finance: What are Subsidies?6 Views
finance a la shmoop what are subsidies they're handouts pork donations [empty hands, man puts coins in homeless man's cup]
political vote buying that is when a given industry can't compete on a level
playing field either domestically like a US cattle producer not being able to [cattle in fields]
compete against cheap mad cow meat from central Russia well the US government
will give subsidies or free money to those American cattle farmers so that
they can you know keep on keepin on that is the world market for ground beef
might be two bucks a pound but the cheapest price at which US producers can
produce their meat is 220 a pound so the US government hoping to keep their
farmers employed and not wanting a repeat of the Joad Family Singers that [cowboy on cattle ranch]
you remember them from Grapes of Wrath will subsidize farmer meat production to
the tune of some f40 cents a pound in free money donations courtesy of the
American taxpayer given to farmers so that they can keep farming and compete [money from people going to government, then to farmers]
without actually having to slaughter and then maintain mad cow pastures just as [man cows with uni-brows]
they do southeast of the Chernobyl nuclear plant and it's the government [cows near Chernobyl]
policy that we want to keep our American farmers alive and well to meat produce
for another day all right well the same government handouts occur
internationally where US manufacturers have to compete against countries who [people working in labs]
allow all of their own countries companies to collude co-opt and work
together in aggressively competitive ways trying to dominate a world market
so think about the cattle industry in Russia where the Russian government is
an active supporter of its own Russian companies coming first ahead of those [Putin holding up patriotic signs]
from other countries you know yeah we're wondering why this is bad like why do
people act surprised when countries actually support their own companies
like their own companies or evil some out who came up with that idea anyway
those other countries work together from the wheat manufacturer to the water
piping distributor to the fertilizer company tapping their own politico's for
product to co-opting grinders are us when it comes time for the cattle to you
know come home well a subsidy is essentially a negative tax the
government is subsidizing supply which shifts the curve to the left like on
this little graph thing here that is input suddenly got cheaper
thank you hard-working taxpayer contributions lots of controversy
surrounding subsidies some folks support them while others claim they unfairly [happy people dancing in front of government building]
affect prices or give developed countries a big advantage over less [a group of unhappy people]
developed countries that might not have the cash to help their industries
there's a whole lot of corruption in unlevel playing fields that cloud the
story on both ends but no matter how mad some people are about subsidies just
remember that no one is as mad as these cows [mad uni-brow cow charges the screen]
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