Tax incentives stink.
Don’t just take my word for it. Listen to Amity Shlaes, author of a ground-breaking study of how the government put the “Great” in the Depression, in a Tax Analysts piece ($link):
The greatest problem with tax incentives is that they distort the economy in ways that hurt us all in the long run. The tax deductibility employers enjoy when they buy health insurance for workers was first offered decades ago in the name of a righteous goal: encouraging those employers to provide coverage for uncovered citizens. But the third-party payment system that resulted provided a significant disincentive for doctors and patients to economize on healthcare. No one really knew who was paying, so no one took the costs seriously.
And they aren’t cheap:
Removing all tax expenditures, from the child credit to estate tax breaks, would allow lawmakers to cut the top tax rate from 35 percent to 20 percent, as scholars Leonard Burman, Eric Toder, and Christopher Geissler pointed out in a recent Urban Institute-Brookings Institution paper. Or, to put it another way, eradicating tax incentives would make us enough to extend Medicare and Medicaid without cutting benefits.
There’s a great example in the Sioux City Journal of how a tax credit for “green” vehicles works to take away what little exercise exists in a round of golf. The credit for “low-speed electric vehicles” has triggered a stampede to the cart dealers:
Some Siouxland golf cart dealers report a flood of interest from linksters wanting to tap a federal income tax credit that can slice the price of the machines in half or more. Out of stock, they’re waiting for new orders to arrive.
“Our sales usually slow down this time of year when the weather gets nasty,” said Jack Mills of Midwest Golf Car in Tea, S.D. “This year, our phones have been ringing off the hook. This has taken us by surprise and we’re trying to meet the demand.”
Why the big rush? To qualify for the credit, which amounts to several thousand dollars, depending on the car battery kilowatt capacity, purchases must be completed by Dec. 31.
The credit is available for carts that are street legal, and they have to be faster than standard carts:
To qualify for the tax credit, the plug-in electric vehicles must have maximum speeds between 20 and 25 miles per hour — nearly twice that of traditional golf carts.
“They’re probably overqualified for golf courses, but that’s probably where a lot of these are going to end up at,” Mills said.
So when you pay your tax bill next April – and a lot of people will find themselves paying — you can at least have the consolation that you are paying so some old guy at the country club could get a great deal on his own personal super-cart.