$7500 tax credit debate/discussion

[Bardlebee]

In my experience changes like this apply to the next tax year. So if in September, 2013 they eliminate the credit the earliest it could take effect is the 2014 tax year (Jan 1, 2014).

Though I am sure its not the cause, I like that Tesla shows the full amount of the vehicle when your in the design studio. It makes them seem at least truthful, though I pity those who don't read the fine print sometimes.

 

[jerry33]

I have the most fair and simple tax system: Do away with the IRS, income tax, corporate tax and many other taxes as excise tax etc. I propose a ballanced budget and a national sales tax. The sales tax rate would be adjusted every year to ballance the budget determined by the amount that the government spent in the previous year. Exempt food and healthcare to allow the poor to function and survive. I propose a 5 year phase in to allow a transition from the current tax system.

Think of the benefits:
Encourage work and savings by allowing workers to keep everything they earn
encourage repatriation of foreign corporate funds
eliminate our outdated tax system of exemptions and deductions
Eliminate the need for individual tax returns and much IRS enforcement
Stronger Dollar
Corporations pay thier fair share
Teach government officials not to overspend by having immediate consequences

This list can go on and on:

I agree with two exceptions:

1) Corporations pay thier fair share

Basically a tax on companies is just a hidden tax to the consumer--unless you don't think that businesses pass on the cost of tax.

2) Exempt food and healthcare:

I'd except education and educational materials as well. The more educated the populace the better a democracy works. Making education affordable is the best way to raise the standard of living.

 

[Kipernicus]

2) Exempt food and healthcare:

I'd except education and educational materials as well. The more educated the populace the better a democracy works. Making education affordable is the best way to raise the standard of living.

While I don't disagree, I think that these well intentioned exemptions (the iPad is educational!) are the slippery slope that landed the tax code where it is today.

But back on topic, does the $7500 credit have an income based phase-out? If your AGI is over X do you still get the full $7500 benefit?
A slightly related question - will AMT wipe out the benefit?

 

[daniel]

Daniel, what's the motivation for the dependents deduction? And do you think it should stay in place or be eliminated as part of "all deductions"?

I presume the motivation for the dependents deduction is to encourage people to have more kids. Politicians like more taxpayers just as preachers like more congregants, And yes, I would eliminate it along with all other deductions.

Government can support programs directly, The problem with using the tax code to support national goals is that deductions can be manipulated to benefit people who are not actually helping the goal; and indirect subsidies via the tax code are impossible to assess via accounting. What's the cost vs. benefit? Direct subsidies can be accounted so we know the cost. Nobody really knows the cost when the subsidy is via a tax deduction, credit, or exemption.

The more educated the populace the better a democracy works. Making education affordable is the best way to raise the standard of living.

Absolutely agree!!!!! That's why I'd make all education free. Technical as well as Academic. And as noted above, I'd set the minimum wage at a living wage. It is scandalous when people in the wealthiest nation on Earth can work full time and yet be unable to afford to house and feed their family. I'd also make all health care free.

 

[daniel]

... does the $7500 credit have an income based phase-out? If your AGI is over X do you still get the full $7500 benefit?
A slightly related question - will AMT wipe out the benefit?

The $7,500 tax credit is not affected by AMT. It is subtracted from your income before AMT is calculated. And there's no phase-out from income at high levels. As noted, you lose all or part if your tax liability is too low. But you can have an income of a hundred million dollars a year, and as long as your tax liability if $7,500 or more, you get the credit.

Some deductions get cut when you have a high income. Not the EV tax credit.

 

[brianman]

I presume the motivation for the dependents deduction is to encourage people to have more kids. Politicians like more taxpayers just as preachers like more congregants, And yes, I would eliminate it along with all other deductions.

Government can support programs directly, The problem with using the tax code to support national goals is that deductions can be manipulated to benefit people who are not actually helping the goal

That was my presumption as well. Furthermore, if encouraging population growth is the motivation, abortions should count as -1 dependents for ~18 years.

 

[Lloyd]

I agree with two exceptions:

1) Corporations pay thier fair share

Basically a tax on companies is just a hidden tax to the consumer--unless you don't think that businesses pass on the cost of tax.

.

I agree, but corporations must have to compete fairly with individuals in small business. Not taxing them puts them at an unfair advantage. They need to pay on plant, equipment etc as do the rest of us under a national sales tax

2) Exempt food and healthcare:

I'd except education and educational materials as well. The more educated the populace the better a democracy works. Making education affordable is the best way to raise the standard of living. .

+1 as long as the universities don't take advantage of being 'tax exempt' and take that as profit. Making student loans readily available has caused 'tuition inflation' in the past!

 

[sp4rk]

When Tesla unleashes leasing, the tax credit is different.

When I got my Leaf, I leased instead of buying and "they" put the $7,500 down as the down payment.

Otherwise I'd not have gotten anywhere near all the tax credit.

I cannot believe the tax breaks the fossil fuels companies get ... as Bonnie eloquently replied ... holy &*^(*!

 

[jerry33]

I agree, but corporations must have to compete fairly with individuals in small business. Not taxing them puts them at an unfair advantage. They need to pay on plant, equipment etc as do the rest of us under a national sales tax

Are there any small businesses that don't incorporate?

+1 as long as the universities don't take advantage of being 'tax exempt' and take that as profit. Making student loans readily available has caused 'tuition inflation' in the past!

That's true, but the alternative (other than having almost unaffordable tuition) is to have the government give the money to the Universities. This wouldn't be bad except that it always leads to "approved curriculum"--"You want government funds, you teach what we tell you". Of course, if the schools didn't spend 90% of their budget on sports... but that's another rant.

 

[jerry33]

Have been concerned about losing out on the federal tax credit if a regime change occurs in November (i.e. a Republican sweep of the House, Senate and the White House). I wonder if that tax credit repeal, if it happens, will be retroactive to cars purchased earlier in 2013 before the law passed.

My guess is that they will keep the credit intact and take the credit for it.

 

[brianman]

My guess is that they will keep the credit intact and take the credit for it.

Well that's a double-edged sword, now isn't it?

If they cancel the credit, they get the blame.
If they retain the credit, they get no credit.

Double standard?

 

[SByer]

Sure, the gas and oil company subsidies need to be eliminated. Doing that overnight would be a horrendous wrench in the economy; and here is where governments have a particular skill set (that they just seem to consistently fail to exercise) - think long term and smooth these thing out over 5-10 years. We should have started doing that with gas and oil 40 years ago <<insert Jon Stewart video link here>>.

As for education, while I think a 'good' education through college should be free, it should at least be through a voucher system (as should grade school education), and should not completely cover the most expensive schools. There needs to be some skin from those getting the vouchers to ensure they are actually utilized. But certainly, that can't be worse than the current union-controlled no-performance-measured centrally controlled system that, even then, still doesn't have enough power to prevent the intelligent design wackos from dumbing down the science textbooks. That's the trick, isn't it? Provide the best opportunity for equality and self-starters possible while minimizing potential abuses of the system (I consider the anti-science bent in the school systems in some parts of the country - hi Texas! - as abuse).


On topic:
I estimate based on average car mileage (25mpg), the subsidy per gallon (~>$4/gal), and the typical miles driven per year (12-15k), the EV subsidy gets 'used up' in about 3-4 years. I'm near or past the 'no subsidy' point, so don't tell me how EVs are subsidized!

 

[Doug_G]

Are there any small businesses that don't incorporate?

Yes, that would be a Sole Proprietorship.

 

[gg_got_a_tesla]

I presume the motivation for the dependents deduction is to encourage people to have more kids. Politicians like more taxpayers just as preachers like more congregants, And yes, I would eliminate it along with all other deductions.

That was my presumption as well. Furthermore, if encouraging population growth is the motivation, abortions should count as -1 dependents for ~18 years.

We are getting into some hairy territory here, atleast for this forum. My take on this is that population growth (and any Govt. measures to encourage it) is a problem and not just for the Third World; there's enormous pressure being put on resources, sustainability and economic growth at the macro level while also creating a pool of folks who are essentially 'handicapped' at birth - born to poorer parents with more mouths to feed and not enough of a chance to get as well as provide a good education to improve their lot. The vicious cycle continues in an exponential manner

Way off topic... Sorry.

 

[brianman]

@gg_wants_a_tesla - You didn't bring it to this branch, so you can relax.

Regarding the general off-topic... terms like "fair" and "right"/"wrong" are where such branches of discussion come from.

 

[Beavis]

This is a question for any tax attorneys or CPAs in the audience: IF a new administration takes office and decides to revise the tax code to eliminate the $7500 tax credit on EVs at what point would you reasonably expect the revision to become effective? My understanding is it would take an act of Congress to revise the code (please correct me if that is incorrect) which takes some time. If they started Jan 1 what is a reasonable length of time for such a bill to pass? Then once passed is it more reasonable to assume it will be retroactive to Jan 1 or will take effect at the time it passes? How are such tax revisions usually implemented--immediately or retroactively?

These questions are directed at determining the probability of a "grace period" after Jan 1 during which the $7500 tax credit might still exists even IF a new administration takes over. There may be a number of us who are stretching for this car whose number will come up this year but would rather not buy the air suspension and/or 60 kwh battery. It would really help to better understand the probabilities involved in losing the tax credit by waiting to get what we want and can better afford. Thanks.

Here is your answer with regard to any upcoming tax changes. According to our firm's legislative experts, there will be no action prior to November. After the election, the lame duck session will be focused on the debt limit debate and the automatic spending cuts. Everything will be on the table in terms of getting an agreement and nobody has any idea what will happen. Once an agreement on the debt limit is reached, nothing else will be accomplished in the lame duck. The next session of Congress? Your guess is as good as mine. Everything is on the table.

 

[daniel]

... as long as the universities don't take advantage of being 'tax exempt' and take that as profit. Making student loans readily available has caused 'tuition inflation' in the past!

Today, the tuition "MSRP" of universities is much higher than the average actually paid. Universities want to balance their student mix, so if they need you to balance their mix, and you cannot afford "full" tuition, they offer you a discount. In some ways this is good, as it allows more poor students to get an education; in some ways it's bad, as it makes students pay more than the real cost if they can afford it. But even so, the cost is so high that most students graduate with oppressive debt. As Jerry noted earlier, an educated country is a stronger country, so we all benefit when more kids can get an education. And when adults can get an education when their job disappears due to changing technology or economics. So we all benefit from universal free education paid for by a graduated income tax.

 

[ddruz]

kroneal, Thank you for checking with your firm's legislative experts. Much appreciated in addition to the other information provided by other members here.

 

[artsci]

Today, the tuition "MSRP" of universities is much higher than the average actually paid. Universities want to balance their student mix, so if they need you to balance their mix, and you cannot afford "full" tuition, they offer you a discount. In some ways this is good, as it allows more poor students to get an education; in some ways it's bad, as it makes students pay more than the real cost if they can afford it. But even so, the cost is so high that most students graduate with oppressive debt. As Jerry noted earlier, an educated country is a stronger country, so we all benefit when more kids can get an education. And when adults can get an education when their job disappears due to changing technology or economics. So we all benefit from universal free education paid for by a graduated income tax.

Actually, at most private colleges and universities and even many publics, especially those with sizable endowments, nobody, not even so-called "full' payers pay the actual full costs. Endowment income and gifts from alumni and other donors subsidize a fraction of costs for all. At some top private universities if the full real cost was actually charged to students it would be more like $80,000 a year. So everybody, including the most affluent students who think they're paying the "full" costs, are actually receiving financial support, a discount if you will, made possible by the generosity of current and previous generations.

 

[pguerra]

One thing that nobody mentioned yet on this thread. I would not assume that the $7,500 credit will be available to customers who take delivery in 2013. Right now, we know for sure that it is available for purchases in 2012. But 2013 is not guarantee. It's an election year too, and the challenger's pick for energy advisor is a billionaire oil man. Draw your own conclusions.

Someone please correct me here:

The risk of the $7,500 tax credit expiring due to Obama or lame duck Congress letting it expire at the end of this year is a far greater possibility than Tesla selling it's 200,000th car by 1st qtr 2013 (When I'm slated to receive Model S).

If the above is true, how likely will it be that in 2013, the credit will end due to gov't allowing it to expire, not renewing it, etc?

THANK YOU.