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For 20 years, I have assigned my tax policy students the challenge of designing a stupid tax incentive that sounds plausible. They've produced some weird and wonderful ideas, but nothing as good as the American TRIP Act, introduced by @SenMcSallyAZ. https://www.mcsally.senate.gov/imo/media/doc/American%20Tax%20Rebate%20and%20Incentive%20Program.pdf
The "American Tax Rebate and Incentive Program Act" would allow a nonrefundable tax credit of up to $4,000 ($8,000 for married filers) plus $500 per child to cover expenses for a vacation in the US at least 50 miles from home. It would cover vacations taken through 2021.
It covers costs other than lodging for travel to one's second home. (Since President Trump has declared Mara Lago his primary residence, this presumably would cover expenses he incurs at the White House.) Costs of "live entertainment events (including sporting events)" qualify.
The second part of the assignment is to critique the proposal. Students evaluate their proposals on the criteria of efficiency, equity, and administration and compliance costs. The TRIP Act fails every criterion. It's inefficient.
Why target a subsidy at the hospitality and travel industries when almost every sector is hurting? Why subsidize travel to second homes when people are sure to do that without a subsidy? (I'm writing this from upstate NY where I've been hiding from the virus since March.)
It's extremely inequitable. Low- and Middle-income people would get little or no benefit, either because they don't have income tax liability or because they cannot afford to front vacation costs that won't be reimbursed for many months.
And it would be impossible for the IRS to administer effectively. They have no way aside from an intrusive audit to verify that the taxpayers have incurred the expenses they claim reimbursement for.
Will the IRS monitor people's Facebook pages and summon those who claim the credit but don't post vacation pictures?
Anyway, thanks Senator for providing such an excellent example for my class.
Anyway, thanks Senator for providing such an excellent example for my class.
Meanwhile, I have Grateful Dead's "Truckin'" playing over and over in my head. "What a long, strange TRIP it's been."
PS, The TRIP act was today's headline item in the excellent Daily Deduction from the @taxpolicycenter. You can read it or sign up for a daily email here: https://www.taxpolicycenter.org/daily-deduction cc @RenuZ
