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Commons Tax Credits

Peter Barnes: Capitalism 3.0 — Chapter 9: Building the Commons Sector (pages 135-154)

Some commons trusts will generate income from the sale of usage permits. Many others will need income to acquire property rights, restore degraded habitat, or give children start-up capital. It’s therefore essential to encourage a multiplicity of revenue sources. The best way to do this is through a federal commons tax credit.

When I was in the solar energy business during the 1970s, our customers benefited from a combination of federal and state solar tax credits. As I frequently explained then, a tax credit isn’t the same as a tax deduction — it’s bigger. A deduction is subtracted from the amount of income subject to tax; if your marginal tax rate is 30 percent, a tax deduction saves you thirty cents on the dollar. By contrast, a tax credit is subtracted from the amount of taxes you pay, regardless of your tax bracket. If you owe taxes, it always saves you one hundred cents on the dollar.

The premise behind a commons tax credit is that wealthy Americans owe more to the commons than they currently pay to the government in taxes. That being so, a commons tax credit would work like this. The federal government would raise the uppermost tax bracket by a few percentage points. At the same time, it would give affected taxpayers a choice: pay the extra money to the government, or contribute it to one or more qualified commons trusts. If people do the latter, they get a 100 percent tax credit, thereby avoiding additional taxes. The message to the wealthy thus is: You have to give back more. Whether you give it to the IRS or directly to the commons is up to you. If you want to eliminate the government middleman, that’s fine.

What qualifies as a commons trust? It’s a trust that either benefits all citizens more or less equally or collects money to restore an endangered commons. Social Security, the American Permanent Fund, the Children’s Opportunity Trust, and most land and watershed trusts, would qualify. By contrast, a normal charity would not.

Contributions to normal charities would remain deductible from taxable income, but not from taxes owed. ... read the whole chapter



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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper