033. New Home Ownership Subsidy Law

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The Home Ownership Subsidy Law (Eigenheimzulagengesetz) is often associated with the 1996 Tax Act, but it is in fact the most important part of a distinct piece of legislation which completely transforms the system of public support for persons buying or building a home of their own. The Act for Restructuring the System of Fiscal Aid for Home Ownership, which received approval from the German Bundesrat on 24 November 1995 after being passed by the Bundestag the week before, replaces a system of home ownership supports based primarily on tax deductions with one based primarily on direct subsidies. Providing support in the form of tax deductions is objected to by its critics on the grounds that the economic benefit of a tax deduction is greatest for persons with high incomes and vice versa.