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Ribald Humor Abounds Despite Seriousness of Legislation

posted in: Weekly Commentary 0
By Lowell L. Kalapa

Despite all the doom and gloom of perhaps raising taxes by rescinding the second and third phase of the income tax cuts enacted by the legislature three years ago, there are some moments of humor that really would be funny if it wasn’t for the fact that this stuff could become law.
Novices to the gleaming concrete hallways of the state capitol take their missions so seriously that they sometimes miss the humor that abounds as a result of well-intended but misguided intentions. For example, one measure would have allowed taxpayers to check off a donation to a new school level minor repairs and maintenance fund.
As the lead on this particular bill, the lieutenant governor provided glowing testimony in support. Unfortunately, the way the bill was drafted at that point in the legislative process the designation could only be made if the taxpayer had a tax credit. So if you don’t have a tax credit, you wouldn’t be able to make the designation. As a result, there would be few, if any, designations made for the new school maintenance fund. Apparently what the drafter had intended was that if the taxpayer had a tax refund coming, the taxpayer could then designate $2 of that refund for the new special fund. Well, at least the lieutenant governor admitted that was the intent of the bill.
Then there is the bill that would increase the tax credit granted to persons who match the contributions made by welfare recipients to an Individual Development Account or IDA. The whole idea is to encourage taxpayers to match contributions made to an IDA to help welfare recipients save toward either a first home, additional education, or for start up money for a new business.
The legislature set $1 million aside to “spend” on tax credits. Once $1 million in tax credits was given out, no more credits would be given. The tax credit was set at 50% of the matching contribution made by the taxpayer. Thus, it would take $2 million in matching contributions by taxpayers to utilize all of the money set aside for the tax credits. Thus, the total potential principal that would be saved and matched would be $4 million.
The bill currently before the legislature would raise the tax credit to 100% of the matching contribution made by the taxpayer. In other words, for every dollar of matching contribution made by the taxpayer, the taxpayer would get one dollar back from the pot of tax credits.
While the proponents didn’t see the humor, those who could add up the numbers came to the conclusion that there was no need for the tax credits let alone the taxpayer. Just skip the taxpayer and pay the $1 million to the various IDA’s! Who needs the taxpayer at that point? What is unfortunate is that there will be a lot of welfare recipients who will never have their contributions matched because the tax credit represents only a million dollars in matching as opposed to $2 million.
Then there is the much touted high technology tax incentive bill which proposes to add a slew of new tax incentives for these darlings of the Nasdaq world. One provision of the bill would grant a credit to those who loan funds to a qualified high technology company where the loan is determined to be a bad debt and therefore worthless as charged on the books of the taxpayer. These would be venture capitalists who make high risk loans to high technology companies. The credit would be equal to 100% of the debt up to $100,000 and 50% of the debt in excess of $100,000 for each high technology business. Who needs venture capitalists?
Just think, you can loan money to one of these high technology firms at no risk up to $100,000 because the state is going to make you whole. And if you loan more than $100,000 to these companies, you will at least get 50 cents on the dollar back on your loan. Don’t you wish the state would cover all high risk business loans? Maybe we would have more small businesses . . . or maybe more loans.
Finally, the really cute bill of the session is a tax credit that would be awarded for the construction or remodeling of a commercial, industrial, hotel, or warehouse facility that is 25-years old or older or is in a district which more than 25-years old. Of course, in the mind of the proponent, the focus is on remodeling old dilapidated buildings that are 25-years old or older. However, as drafted, the commercial facility could have been built just last year, but because it is located in a district that is 25-years old or older, the remodeling or construction costs would qualify for the credit. So much for the best of intentions.

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