Tuesday, January 28, 2014

How Tax Forms Mirror Social Policy

Some would say that 13 is an unlucky number.  The year 1913 brought us the beginning of the US income tax system, which many of us think of as an unfortunate fact of life.  But what many of us don’t know is that we fill out tax forms not just to fund our government, but also to contribute to society.
Filling Out Tax Forms Does More Than Fund The Government
It all started with the 16th Amendment, which authorized the income tax in the United States.  It was created not only to financially support the government but also to promote social and economic policies.  The IRS uses tax incentives to promote governmental preferences regarding how we live.
How Tax Credits Help Society
Earned Income Credit is an example of a social policy that’s nudged along by the filling out of tax forms.  People in certain lower ranges of income can get an additional credit and it helps increase the refund they get.
You can also get a credit for paying for child care…that’s how the government encourages people to spend on day care.
The federal government also encourages you to contribute to charity.  Yes, there’s a tax form for that too.  Fill it out and you can see more deductions from your taxable income.
Then there’s also the workforce development credit…hire certain parts of the population, get tax credits.  The idea is to help the economy by helping disadvantaged populations.

Hurricane Katrina deductions and credits are examples of how the tax system helps further economic policies.  There are deductions and credits for starting a  new business in the New Orleans area, for developing the workforce there.  This is designed to spur on the economy in areas hit by Hurricane Katrina.
Louisiana Business Tax Extension

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