Who Deserves a (Tax) Break Today?
What do adoptive parents, historic barn restorers and food bank supporters have in common? They’re all eligible for tax credits in certain states.
Now some New York legislators want to give tax credits to nurses, volunteer firefighters and residents who buy gym memberships.
While some say the proposed legislation is a good way to encourage socially responsible behavior, critics say it complicates the tax system and is less honest than simply giving such groups money outright. Credits reduce dollar-for-dollar actual taxes owed, unlike tax deductions, which reduce total taxable income.
Tax credits are not new — they’ve been around for generations — but experts say these types of socially oriented tax credits are growing in popularity, according to the Associated Press.
"In the '60s and '70s, we started using the tax system for social engineering with a vengeance," said Richard Pomp, tax expert and professor at the University of Connecticut School of Law. "Now it's this do-gooder philosophy: `Hey you're a good guy! Why don't we give you a credit?'"
Most tax credits are used to reward businesses that expand or do research. Farmers or low-income workers receive tax credits to lessen their financial burden. Other credits are tied to certain desired behaviors, such as conserving energy, adopting children, restoring historic structures or installing composting or recycling equipment.
New York State Assemblyman James Tedisco says tax credits can save money. He proposes offering tax credits to people who buy exercise equipment, join a gym or otherwise spend money on healthful activities. The idea is to save society the costs of caring for more unhealthy people down the line.
The idea behind the tax credits for volunteer firefighters and nurses is to keep enough people in those needed professions.
"We reward people for behavior that's positive, that makes a difference, that actually helps the quality of life in your community and maybe saves you money in the long run," Tedisco said.
Frank Mauro of the New York state-based Fiscal Policy Institute criticized "junking up" tax codes with all sorts of credits.
Pomp said politicians are well-intentioned but misguided. "There is no limit to the do-gooder type of philosophy," he said. "There's no limit to the number of groups that come in and think they're deserving."