Tax Credits: Their Critical Role in Comprehensive Tax Reform

Public debate over fundamental changes to our tax laws centers on issues that affect many diverse elements in our society. Tax base design and rate structure are invariably the focal points of the discussion. By its nature the dialogue is far reaching and all encompassing. As the focus shifts to the specifics, the part played by tax credits in the plan takes on paramount importance. For legislators and their constituents change to the credit regime has serious consequences in terms of money and political power. Thus the ultimate success of a comprehensive tax reform proposal rests in a real way on understanding the credit’s place in our income tax system. The author’s survey of federal and state personal income tax credits maps out the details. The profile that emerges underscores the difficult challenges faced by those who believe in comprehensive tax reform as well as the dangers inherent in the present system.