West Maui Taxpayers Association
  • HOME
  • Olowalu Fire Station
  • WMTAPAC22
  • Affordable Housing
  • West Maui Lifesavers
  • Wall of Honor
  • Support WMTA
    • Membership - One Time Payment
    • Membership - Recurring Payment
    • Donations
    • Wills & Trusts
    • Charity Walk
  • Newsletter
  • Emergency Planning
  • News Blog
  • About Us
    • Goals & Objectives
    • Accomplishments
    • Board of Directors
    • WMTA vs WMIF
  • Contact
  • Subscribe

CreditAbles

4/10/2017

 

WMTA Shares these commentaries, without taking a position unless otherwise noted, to bring information to our readers

Weekly Commentary

For the Week of April 9, 2017
CreditAbles
By Tom Yamachika, President
 
This year’s legislative session, as in many others, considers many and varied forms of tax relief.  Terms being bandied about include exemptions, deductions, and tax credits, and among tax credits there are the “CreditAbles” – refundable, nonrefundable, and assignable credits.  This week we will take some of the mysteries out of those terms.

An “exemption” or “exclusion” describes something that normally would be subject to tax – an item of income, perhaps – and says it won’t count toward figuring your tax.  A “deduction” describes something that may or may not be subject to tax in the first place – such as an expense – and will be subtracted when figuring your tax.  For personal income tax purposes, for example, a payment you get from an employer to reimburse you for bills you paid on your employer’s behalf is exempt (payments from your employer are normally taxable), but interest you paid to the bank on your mortgage is a deduction.

Exemptions or deductions can be worth a little or a lot, depending on the tax rate.  For state income tax where you are in the 8.25% bracket, for example, a $100 exemption or exclusion would change your tax bill by $8.25.

Tax credits don’t reduce the income on which the tax is based.  Instead, tax credits reduce tax directly.  Different kinds of CreditAbles work differently, however.

Refundable credits are functionally the same as cash.  You can pay your tax bill with refundable credits, and if there are credits left over after all the tax is paid, the government will write you a check for the difference, just as if you paid your tax with the same amount of money.  Typically, the Department of Taxation (DOTAX) doesn’t like refundable credits.  They’re a lot of work, and involve more than one agency because under our system DOTAX can’t cut refund checks.  Instead, a refund request needs to go through DOTAX’s checks and balances to the Department of Accounting and General Services, and those folks, after going through their own checks and balances, cut and mail the checks.  I still wonder why DOTAX can’t cut its own checks.

Nonrefundable credits are a lot less work because they are like store coupons.  You can pay your tax bill with nonrefundable credits, but if there are any left over after your tax for the year is paid, no check is forthcoming.  Instead, you need to wait for another occasion to use the credits – next year’s tax, perhaps. 

With assignable credits, the coupons can be bought and sold.  The concept addresses nonrefundable credits that are earned by folks who typically don’t pay state tax, such as nonprofit charities or out-of-state organizations.  A store coupon against tax is useless when you aren’t paying tax, but would be worth something to a person who does owe tax.  In states that offer assignable credits, the credits typically trade at a small discount to compensate the buyer for the trouble it is going through.  That’s one way a tax credit can be made valuable to a non-taxpayer without making the credit refundable.

Putting this knowledge to work, one of the earlier drafts of a bill being considered by our legislature made a certain credit refundable and assignable.  We said it didn’t make sense.  Who would want to buy or sell cash?  Fortunately, the powers that be saw the absurdity and got rid of the assignability feature.  It turned out that the bill author wasn’t thinking about having taxpayers make a market to sell the credits, but wanted something slightly different, which might be accounted for in the next bill draft.

That covers our list of CreditAbles.  We trust that it will make the discussion of tax credits and incentives more understandable, and help make our tax system more tolerable.


WMTA Shares these commentaries, without taking a position unless otherwise noted, to bring information to our readers

Comments are closed.
    Picture

    RSS Feed


    If you wish to further discuss blog posts, please contat our office directly or contact us via Contact page.

    Categories

    All
    Affordable Housing & Homelessness
    Board
    Capital Improvements
    Charity Walk
    Commentaries
    Community Events
    Community Resources
    CON
    COVID 19
    Educational
    Emergency Planning
    Health & Safety
    HHARP
    Housing
    Infrastructure In West Maui
    In The News
    Kapalua Airport Runway Lights
    Kapalua Coastal Trail
    Lahaina Bypass
    Legislature Newsletters
    LLC
    Long Range Transportation Plan 2040
    Long-Range Transportation Plan 2040
    Makila
    MAUI CANCER CENTER
    Maui Cancer Center Llc
    Maui County
    Maui County Budget
    Maui County Dept Of Environmental Management
    Maui County - Dept Of Water
    Maui Destination Management Plan
    Press
    Public Safety In West Maui
    Real Property Tax
    Recycling Info
    TAT
    Tax
    Tourism
    Traffic & Roadways
    Transportation
    Video
    Vote
    Voting
    West Maui Community Plan
    West Maui Hospital
    West Maui Skate Park
    WMTA Annual Meeting
    WMTA Breakfast Events
    WMTA Candidates Night
    WMTA Disaster Preparedness
    WMTA Fundraisers
    WMTA Hot Topics
    Wmta Hot Topics Replay
    WMTA Membership
    WMTA PAC
    WMTA Sunset Sail
    WMTA Whale Watch

Quick Links: 

Home

News

About Us

Wall of Honor

Newsletter

Support WMTA
Emergency Planning

Contact

Copyright © 2021
Photo used under Creative Commons from wolfsavard
  • HOME
  • Olowalu Fire Station
  • WMTAPAC22
  • Affordable Housing
  • West Maui Lifesavers
  • Wall of Honor
  • Support WMTA
    • Membership - One Time Payment
    • Membership - Recurring Payment
    • Donations
    • Wills & Trusts
    • Charity Walk
  • Newsletter
  • Emergency Planning
  • News Blog
  • About Us
    • Goals & Objectives
    • Accomplishments
    • Board of Directors
    • WMTA vs WMIF
  • Contact
  • Subscribe