While much of our attention is focused on the presidential race and the impact of Hurricane Isaac, a proposal assist veterans with special tax benefits is moving through Capitol Hill.
The Senate Finance Committee has approved legislation entitled the Family and Business Tax Cut Certainty Act of 2012. Under the “Returning Heroes and Wounded Warriors Work Opportunity Tax Credits” provision, qualified veterans can receive a variety of benefits.
A tax credit is better than a tax deduction. With a “tax deduction,” your taxable income is reduced. For example, if you write off mortgage interest worth $2,400 on a VA loan, your taxable income is reduced by $2,400. If you’re in the 25 percent tax bracket, your taxes are cut by $600.
Alternatively, if you have a $2,400 “tax credit” it means your tax bill is reduced by the full $2,400.
While the veterans’ benefits package seems attractive it does raise some questions. For instance, why is there only a one-year extension? Why does the question of extending veterans’ benefits have to come up at all next year? Is there anyone in favor of ending such programs?
But a more complicated question is this: Can’t we do better?
Despite the fancy name given to this plan — the “Returning Heroes and Wounded Warriors Work Opportunity Tax Credits” provision — the entire package will reduce taxes for vets and their families by $53 million. In comparison, the same legislation cuts the tax bill for some film and television productions by $266 million. That’s about five times as much for entertainment companies as veterans will get.
This is backwards. I like TV and movies, but I think the national obligation to veterans and their families is greater.
Photo courtesy vinothchandar