Overview of US Tax Credits

The U.S. government provides housing assistance to low-income families and individuals through different programs, two of them are: Section 8 tenant-based subsidies (also called Section 8 Housing Choice Voucher program); and Section 8 project-based assistance, under which property owners receive government subsidies to decrease rents (Carlson). The

Section 61 of the Internal Revenue Code defines income as “income from whatever source derived unless otherwise excluded” (2014, IRC Code). In determining income, several key concepts have evolved from this definition. Explain the following concepts, and provide at least one example of each. Explain which concept you think is most beneficial from a taxpayer’s point of view and which concept is most beneficial from IRS’s point of view.

Income Tax Credit”. For the most part, it seems as though the general public is under

Tax deductions reduce taxable income; their value thus depends on the taxpayer’s marginal tax rate, which rises with income. Tax credits directly reduce a person’s tax liability and hence have the same value for all taxpayers with tax liability at least equal to the credit. In addition, some credits are refundable; they are not limited by the taxpayer’s tax liability.

The current tax code for the United States is almost 74,000 pages long. Or to put that into a different light: About 116 copies of Herman Melville’s Moby Dick. It is small wonder that a few of the announced candidates for President of the United States, have again begun to kick the tires on the topic of a Flat Tax. But is a flat tax actually a solution to our country’s growing tax complexity? What are the potential economic effects of a flat tax (both positive and negative)? Finally, is a flat tax even a viable solution? In short, will it work? As a concept, a flat tax is spectacular. Simplicity at its finest. As a fiscal policy, I believe that same simplicity must be examined and inspected closely.

The tax system was created as a way for the government to raise revenue and provide services on the behalf of those who pay those taxes. The burden of the level of taxes paid by the citizen seems to continue to increase, but the purpose of tax exemptions, according to the Louisiana Budget Project, is to encourage certain activities-such as economic development, the hiring and training of the unemployed, and the development of low-income housing. The

The federal law protects US citizens’ right to qualify for the tax credit if they can meet all requirements. At the same time, citizens should pay tax at their income level. The Packards has the

The state of Michigan’s Earned Income Tax Credit is a good anti-poverty mechanism for low and moderate income working families. The Michigan credit was an effective technique for achieving a reduction of the poverty rate in 2011. The Michigan Earned Income Tax Credit targets a certain income level of working families. In 2011 the state Earned Income Tax Credit reached over 700,000 households. Governor Rick Snyder does not support its state credit geared toward low income families irrespective of the amount of families that were elevated out of poverty. The tax credit advocates for children and child education, can stimulate the economy by way of the multiplier effect, and lead families to self-sufficiency.

Tax time in poor neighborhood is not April but January, and this “income tax” is not what you pay but what you receive. As soon as the W-2s arrive, the working poor eager for their checks from the Internal Revenue Service (IRS) and immediately send the documents to the tax preparers who have flourished and gouged impoverished laborers since the welfare tie limits were enacted by the Congress in 1996. The checks that come from Washington include not only a refund of tax withheld but also an additional payment known as the Earned Income Tax Credit (EITC) (Shipler, 2005, p.13), which is a refundable tax credit designed to redistribute incomes and supplement low-wage workers. The EITC was initiated in 1975 and then expended under President Reagan,

A government spending program that I heard about in the news lately is the program for low-income housing tax credits, also known as LIHTC. According to the NPR article, Affordable Housing Program Costs More, Shelters Fewer by Laura Sullivan and Meg Anderson (2017), LIHTC is a program the incentivizes the building of low-income housing by providing tax credits. The IRS distributes tax credits to state and local housing agencies and those agencies give them to developers. The developers then sell the tax credits thru an intermediary, known as syndicators, to banks and investors for money to build the apartments. In this program, the opportunity cost, or the cost of the next best alternative (Wolla, 2013), would be what the government could have done with the tax revenue that would have been gained if those credits were not issued. The money could be spent towards education, defense, other government social programs, and

However, the Earned Income Tax Credit’s cost rose considerably between 1986 and 1996 as a result of the policies enlargements passed in 1986, 1990, and 1993 – each of which phased in over some years. As a result of this, Beverly (2002), discovered “Evidence from several small studies suggest that families use tax refunds – which may include overwithholding as well as EITC payments – to catch up on bills and to purchase items for children” (pg.

The federal government and many state governments offer various tax credits, incentives and larger Section 179 deductions for increasing energy efficiency, accommodating people with disabilities, removing architectural and transportation barriers to mobility-challenged people and encouraging entrepreneurs to revitalize certain enterprise zones in some urban cities and areas where natural disasters have occurred.

Taxes are the dollars that we pay to government to supply the services that are not or can not be provided through the free enterprise system. Taxes have been around since the beginning of organized societies. They come in various forms. Most common are income taxes both federal and local government. These taxes are assessed on the amount of income a person earns. Other taxes come in the form of user taxes; these taxes are imposed on the people that are using the goods being taxed, such as gas tax, alcohol tax, sales tax, and luxury taxes. Property taxes make up the major revenues for local and city governments. Furthering the burden of taxation are taxes that are attached to such bills as utility

Medicaid is for low income: pregnant women, children under the age of 19, people 65 and over, people who

Tax system is a legal system of imposing and collecting taxes from the citizens of the country. As it has been stated by Albert Einstein, the hardest task in the world is to understand the tax system of a country. The United States’ tax system is so complicated that its tax code contains almost 3 million words and 6,000 pages. Moreover, the taxes implied by city and state governments add more complexity to the federal taxation system. In this case, we do not need to understand the complexity of tax code system in order to get acquainted with the significant role of taxes in American society.