Wednesday, December 7, 2011

TAX CREDITS-Too many of them

The real reason taxes are complicated is not due to the calculation of the
tax once the taxable income is determined.  The real problem is with all the
deductions and credits.   Many of these deductions and credits are designed
to encourage things presumed beneficial to society.  But now there are so
many of these deductions and credits that it has led to a tax code that is
overly complicated.

TAX CREDITS may encourage something useful, but is it right for someone who
produces something beneficial to the environment and, by doing so, makes
several million dollars, to pay little or no tax due to his qualifying for a
lot of tax credits?

Obviously anyone should be able to deduct the cost of operating his business
rather than be taxed on his gross receipts, but a business that makes a high
profit net of all expenses should not escape tax by taking a lot of tax

Here are some of the  forms to be filed for some of these many credits:

Schedule R-credit for the elderly and disabled, Form 1116 Foreign tax
credit, Form 4136 Fuel tax credit, Form 3468, Investment tax credit, Form
3800 General Business Credit, Form 5405 First time home buyer credit, Form
5695 Residential energy credit, Form 5884 Work Opportunity Credit,
Form5884-B, New Hire Retention Credit, Form 6478 Alcohol Fuel Credit, Form
6765 Research Activities credit, Form 8396, Mortgage Interest Credit, Form
8582CR, Passive Activity Credit Limits, Form 8609 Low Income Housing Credit
Allocation, Form 8801 Credit for Prior year Alternate Minimum Tax, 8812
Additional Child Tax Credit/Combat Pay, Form 8820 Orphan Drug Credit, Form
8826 Disabled Access Credit, Form 8834, Qualified Electric Vehicle Credit,
Form 8835 Renewable Electricity Production Credit, Form 8839 Qualified
Adoption Expense, Form 8844 Empowerment Zone Credit, Form 8845 Indian
Employment Credit, Form 8907 Nonconventional Fuel Production credit, Form
8808, Energy Efficient Home Credit, Form 8809 Energy efficient Appliance
Credit, Form 8810 Alternate Motor Vehicle Credit, Form 8811 Alternate Fuel
Vehicle Refueling Property Credit,  Form 8912 Credit to Holders of Tax
Credit Bonds, Form 8936 Qualified Plug-in Electric Drive Motor Vehicle
Credit, Form 8941 Small Employer Health Insurance Credit.

There is nothing particularly bad about any single one of these credits.
The bad thing is that there are just too many of them.  It would be better
to eliminate them all rather than to continue having all of them.  The
benefits derived from those getting these credits are offset by the
necessity to either tax non-recipients more in order to grant these credits
or the necessity  for the government to go deeper into debt or print more
money and reduce the purchasing power of the dollar.

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