Give them Credit

                                                           Manipulating the public

The tax credit has been the most useful tool for the government to support or subsidize those areas that they decide are functions of the Government.  Frequently the original or stated purpose is buried by consequences of the results.

Itemized deductions were originally presented as a device to promote home ownership.  As with most tax credits or deductions, the principal beneficiaries are the taxpayers with the highest income.  Due to Standard Deduction amounts few taxpayers benefit to any discernible degree until they are in and above the fourth quintile of income.  That is above $70,000 annual income.

  The gain, if any in the lower half of average income normally is less than ten percent of the itemized amounts.  At the upper end they save around thirty percent.  A head of household Illinois resident might save around $1,100 from an annual income of $60,000.  The HH Illinois resident earning $300,000 would save around $22,500.   Five times the earnings gains twenty times the benefits.

If a taxpayer pays $10,000 for state taxes, should the Federal Government reward them $3,000 in tax credits for this liability.   A high income taxpayer with a mortgage of 6.5% ends up as the equivalent of around 4.5%.    Most taxpayers are led to believe that the Itemized deduction facet is there for their benefit.   I think we can state that if there were no itemized deductions we would not find Murdoch or Trump living in FEMA trailers.

Certainly lost would be the deduction from charitable deductions.  A significant number of taxpayers have contributed a considerable amount of money and will continue to do so when they think the occasion is important.  Many wealthy individuals and businesses have contributed and will continue to contribute regardless of tax adjustments.  

The individuals and businesses that might be affected could still give around 70 percent.  They could call in the photographers and media.  They could tell them what a great person/business they are, hand them a plaque and they would be satisfied.

Tax changes will be suggested and hopefully equitable changes will be made.  The legislators love to point out the complexity of applying and regulations regarding compliance in filing.  These are almost always inferring as a part of the IRS.   These complexities and thousands of pages were not caused by the IRS.  They became the necessary  result of all the individual and corporate tax credits passed by the legislators.

Earned income credit and Child tax credit.

The earned income credit proposed during Gerald Fords administration was purported to move people away from welfare to employment.  Certainly  must credit significant success in its initial form.  Candidates frequently suggest increasing the EIC as something for the general public good.  This was not enough so they added the Child Tax Credit and additional child tax credit.

My perspective suggest that the EIC has been a significant factor in wage stagnation.   The businesses could not discriminate in salary regarding the family obligation of the employee.  The Government chose to do this for them.  The employee with eligible children could frequently end up with $6,000 and more net than the single or married without children.  There is no tax obligation, they and their employer do not contribute to Social Security.

I have heard on more than one occasion the suggestion that low-paying business such as Wal-Mart, restaurants and other small businesses do not lack in employment applications.   They also point out the benefits from EIC and other programs.

They do not ask where these benefits come from.  That is: who pays the piper.   Those businesses that rely on Federal and state programs to compensate for their traditional inadequate pay.  If this cost is not passed on to the consumers of the products and services of these companies it must come out of the taxes from the individuals and businesses that do pay equitable salaries.  That is if the other companies and individuals have to pay additional amounts to  "subsidize" the other companies than there company is passing on to their customers the cost generated by others.

Specifically to be applauded is the Child Tax Credit and additional child tax credit.  There are some application rules that limit the additional child tax credit in the lowest end of income.  There are no restrictions to the married filing jointly until there income exceeds $110,000.  Head of households have adjustments after $75,000 income.  

I sometimes question the Head of household tax differencials.  I usually forget the "head of household" discounts.  The government hands out these "head of household" discounts so when you pay your rent, utilities food and other costs you get this equalizing discount.

There is no argument that the base minimum pay is not sufficient to defray the minimum costs of shelter, food, clothing and other household expenses.  The question has to be asked "Why Not!  When an individual is willing to work full time in any area of employment,  it should be expected that they should be able to afford basic needs.  At what point should the government subsidize them for choices that may have been made related to the size of the family and typs of expenses they incur.

Many work full time, sometimes another part time job and give their children the love and attention so important to their development.   Some pay that additional money to get their tax return check within a couple days.  The money may be gone within the month but they have their High Definition Tv, for example, or have paid off the "payday loans" and penalties accrued.

Due to divorce,  the loss of a spouse, and other factors, a financial burden has been placed upon many ouside of the current means to defray current costs.   What is the responsibility of Government and the responsibility of the parent.

The ability and eagerness to procreate should not be the base for aiding the family.   Adequate wages, reasonable health and education cost ( wouldn't that be nice)  should be part of the benefits expected from the business and the state and federal government.

The last increase in minimum wages was met (through coercian) with a requirement that tax credits are part of the package.  These tax credits were no way assured that they would benefit the so-called businesses that were affected by the increase in minimum wages.  The population of the States that paid less than the proposed increase of minimum wages was around 39 percent.  Since these business taxes did not differenciate between the state and targeted business this was just another national  tax credit caused by lazy or cowardly legislatures.

At some time we will have to address the base of income, taxation and credits.  It is not fair to the public or consumer of a goods or product to not pay the direct and indirect cost.  It is certainly not fair for the income and tax liabilty of other businesses to be taxed to compensate for the inadequacy of the original businesses.

This is a base for a "false" economical structure.