First-time home buyers would be eligible for a tax credit of up to $6,500 under a plan being shopped on Capital Hill by the influential National Association of Home Builders.

Under the NAHB's plan, first-time buyers -- those loosely defined as anyone who hasn't owned a house in the last three years -- would be able to claim a credit equal to 10 percent of the purchase price.

There is a difference between a "tax deduction" and a "tax credit." With a tax deduction you can write off an expense, such as mortgage interest or property taxes, and the deduction reduces your taxable income. If you have a $10,000 deduction and are in the 15 percent tax bracket, you would reduce your taxes by $1,500. In contrast, the value of a tax credit is subtracted directly from your tax bill. If you had a $10,000 tax credit, your taxes would be reduced by the full amount, $10,000.

The credit would be temporary, lasting only until Dec. 31, 2001. Buyers who sign contracts after that date wouldn't qualify. But closing wouldn't be required until June 30, 2002, giving last-second purchasers six full months to complete their transactions.

What's more, as the builders' group envisions it, there would be no income requirement, so buyers at all price levels would be eligible. And if your total tax liability was less than the credit, you'd get to take the difference as a refund or roll it over to the 2002 tax year.

The NAHB is trying to sell the idea to federal lawmakers as a quick and instantaneous way to jump start the floundering economy -- as opposed to President Bush's $1.9 billion tax cut proposal, which would take effect over a 10-year period. While the President's plan is now being billed as an economic stimulus package, the group points out, it was actually conceived before the economy needed a kick in the pants.

The 200,000-member organization, which represents builders, remodelers, product manufacturers and allied professionals, concedes the credit would steal business from 2002 and perhaps even beyond. But being a patriotic bunch, they're willing to face that problem when the time comes. They're even agreeable to allowing buyers of existing house to participate. "We want to play an appropriate role in stimulating the economy," said chief lobbyist Bill Kilmer.

The question for potential buyers is this: Should you delay your purchase to see if the builders are successful? The answer: No.

Mortgage rates are so favorable at the moment that it would be senseless to dawdle. If you wait, rates could start heading north again. But if you make your move as planned and Congress rejects the idea, you haven't lost a dime. And if it endorses the concept and Dubya gives his blessing, you'll be in for a nice bonus come next April 15.

Though a tax credit for home buyers is not without precedent, passage is probably a long- shot at this point, anyway. To get the White House's attention, the politically potent NAHB will have to compete with every other special interest group's scheme to boost the economy. But the plan could be more interesting than many others.

No one knows for sure how big a boost the incentive would provide, but there are several indications it could be huge and fast:

• According to David Berson, the chief economist at Fannie Mae, a major source of mortgage money, borrowers who take cash out of their houses when they refinance their loans put about 80 cents of every dollar back into the economy rather than keep it locked away in their bank accounts. And there is no reason to expect rookie buyers not to do the same with their tax credits.

• Contrary to conventional wisdom which claims that the $180 billion remodeling market runs counter cyclical to housing sales, the latest study by the Joint Center for Housing Studies at Harvard University shows that recent buyers make more repairs and improvements to their new abodes than owners who have stayed put.

• In 1975, when the economy was dragged into an oil-price-induced recession, Congress passed a temporary tax credit for new home buyers. The idea was to help jack up the economy by helping builders clear out a large inventory of unsold houses, and consumers responded as hoped: More than half-a-million took advantage of the credit and the back log was reduced substantially.

• As the economy struggled out of the 1991 recession, Dubya's father proposed a $5,000 tax credit for first-time buyers. Congress rejected the credit by a narrow margin, but an analysis by the NAHB showed it would have resulted in nearly a million sales, including about 200,000 by repeat buyers who would have had to replace the homes they sold to first-timers.

For more articles by Lew Sichelman, please press here.