The Enid News and Eagle, Enid, OK

Militant Moderate

March 5, 2010

Tax credits have multiple interpretations

The Governor has proposed a moratorium on certain tax credits in the State of Oklahoma.  He suggests that doing so would add some $300 million to funds available to alleviate shortages of up to $900 million in next year’s budget for the state.  Some republicans in legislative leadership positions are squealing as though their pig had been stuck.  Should this make us wonder why? 

 

First of all, we need to be sure that we understand the meaning of tax credits.  Is this the same as tax deductions?  Is a tax credit the same as a tax break?  Are tax credits handed out to everybody, or are tax credits restricted only to persons or companies who meet certain criteria?  Are tax credits fair?  Is a tax credit the same as a tax cut?  These are all good questions. 

 

Perhaps we should start with the last question first.  Is there a difference between a tax credit and a tax cut?  The answer is “No,” not as far as the negative effect on state revenue available to meet the state’s needs.  Tax credits are tax cuts.  The major difference is that the tax credit is a not a cut in taxes for everyone.  They are selective – just for those who are defined to be qualified for the tax credit.  Everybody else pays the tax.   

 

This brings up the second question:  Are tax credits fair?  The answer is, “No.”  Tax credits are given only to those who are especially defined by legislators as deserving of them.  Everybody else pays the tax as levied.  For tax credits to be handed out, supposedly the receiving person or business is doing something of high priority for the good of the state.  What kind of good thing?  Perhaps they started a new business, brought a job to town, put insulation in an attic, bought farm equipment or supplies, bought an electric vehicle, added a job to their business, and the like.  Tax credits work just like tax exemptions. 

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