about tax credits

[hfojvt]

The Republicans just loooove tax credits, and I hate them. The table below illustrates why. That table assumes no extra deductions such as IRA deductions which reduce your income on line 32 and can provide a credit on line 53 if your income is low enough (at my income the government provides a 50 cent credit for every dollar I put in my IRA up to $1,000) or deductions for student loan interes on line 33 or tuition on line 34 or moving expenses on line 26 or dividend income or capital gains which are taxed at lower rates. Also I made at least one error, being 2/3 through before I remembered that the accursed child tax credit is refundable (and thus not quite as accursed as I am used to thinking about it). (Ha, and I just found another error. I used 2007 tax rates instead of 2008. Since the standard deduction went up by $100 and the personal exemption went up by $100 that makes taxes even lower at all levels. For a family of four making $50,000, for example, the tax drops to $966 from $1076)


household filing status and tax
income --- single -- S+1 --- S+2 --- married --- M+1 --- M+2
$10,000 ** (72) ** (2853) ** (4010) * (349) *** (2853) * (4010)
$15,000 ** 628 ** (2853) ** (4716) ** 0.00 ** (2857) * (4716)
$20,000 ** 1300 ** (2112) * (3740) ** 251 *** (2432) * (4161)
$25,000 ** 2050 ** (1275) * (2687) ** 753 *** (1633) * (3108)
$30,000 ** 2800 *** 232 * (1634) *** 1311 *** (834) ** (2066)
$35,000 ** 3550 *** 1496 ** (581) *** 2069 *** 378 *** (1929)
$40,000 ** 4300 *** 2246 ** 729 **** 2811 *** 1309 *** (424)
$50,000 ** 6743 *** 3746 ** 2229 *** 4311 *** 2586 ** 1076
$60,000 ** 9243 *** 5519 ** 3736 *** 5811 *** 4086 *** 2576
$70,000 * 11,743 ** 8019 ** 6169 ** 8294 *** 5586 **** 4076
$80,000 * 14,243 * 10,519 * 8669 *** 10,794 * 7086 ***** 5576
$90,000 * 16,868 * 13,019 * 11,169 * 13,306 * 9129 *** 7266


With every new credit proposed there are many households at lower incomes which do not benefit because they already don't pay taxes. Thus the benefits of tax credits goto higher income households. The recent mortgage credit is $15,000 or 10% of the cost of your home, whichever is lower, and it can be spread over two tax years. So $7,500 a year. Unless you pay $7,500 in income taxes, you do not get the full benefit of that. Even an $80,000 couple with two kids only gets a credit of $5,576 per year. If they only make $50,000 they get next to nothing, especially considering the table below. The table below shows the taxes paid when Obama's $500 per adult REFUNDABLE tax credit is taken into account.


household filing status and tax
income --- single -- S+1 --- S+2 --- married --- M+1 --- M+2
$10,000 ** (572) ** (3353) ** (4510) * (1349) *** (3853) * (5010)
$15,000 ** 128 ** (3353) ** (5216) ** (1000) ** (3857) * (5716)
$20,000 ** 800 ** (2612) * (4240) ** (749) *** (3432) * (5161)
$25,000 ** 1550 ** (1775) * (3187) ** (247) *** (2633) * (4108)
$30,000 ** 2300 *** (268) * (2134) *** 311 *** (1834) ** (3066)
$35,000 ** 3050 *** 996 ** (1081) *** 1069 *** (622) *** (2929)
$40,000 ** 3800 *** 1746 ** 229 **** 1811 *** 309 *** (1424)
$50,000 ** 6243 *** 3246 ** 1729 *** 3311 *** 1586 ** 76
$60,000 ** 8743 *** 5019 ** 3236 *** 4811 *** 3086 *** 1576
$70,000 * 11,243 ** 7519 ** 5669 ** 7294 *** 4586 **** 3076
$80,000 * 13,743 * 10,019 * 8169 *** 9794 * 6086 ***** 4576
$90,000 * 16,368 * 12,519 * 10,669 * 12,306 * 8129 *** 6266


So, from where I sit a proposal that gives a $76 tax credit to a family of four making $50,000 and gives a $7,500 or $15,000 tax credit to a family of four making $400,000 really sucks. Economic trouble or no economic trouble, after the Bush tax cuts, we need to be INCREASING taxes on households making over $200,000, not giving them tax credits as well as AMT relief.

Further, the tax credits and deductions that already exist, such as the IRA deduction which can be $5,000 per person or $10,000 per couple. Who can afford that deduction? It's not as easy for the person making $25,000 as it is for the person making $60,000.

[county worker]

1. I think we should reverse the Bush tax cuts and raise the amount

that kicks in the AMT and leave it at that.

I have no problem with giving tax credits to those who pay taxes. It is supposed to be an incentive to do something not make the tax code fair.

We should help those in poverty and try to give everyone the same chance to become successful but we are not in the business of giving away money. There is no right to a guaranteed national income amount.

[hfojvt]

2. tax credits to those who pay taxes

except that it is all about reducing the Federal income tax which is almost our only progressive tax. Just as an example, lower income people do still pay taxes. Not Federal Income taxes, but taxes nonetheless.

While it is true that I, for example, do not pay federal income taxes because of my low income and because I also put over $500 in my IRA
account. It is simply not true that I 'do not pay taxes'. Last year, for example, I paid $1,314 in property taxes, $1,928 in FICA taxes (are these 'taxes'? My w-2 says they are.) about $170 in Kansas income taxes and at least $450 in sales taxes. For a grand total of $3,862 on taxable income of $11,968.

Tax credits may encourage certain behaviour, but they also a) reduce the progressivity of the income tax and b) reduce federal revenue. Then federal aid to states is reduced and states and counties and cities either cut services or, more likely, raise their own regressive taxes.