I've been blogging for a total of 36 hours and my blog has already been discovered, mostly by the authors of my regular reads. I'm really happy to see the comments coming in and welcome you all.
My most recent comment was left by Joe Schick who writes:
It's important to remember that the $500 credit is only for families making less than $75,000. Let's not overstate the impact - most people will not be eligible for the tax credit.
Let's analyize the comment from three different perspectives:
A Tax Perspective
Let's start with a simple lesson in tax. Adjusted Gross Income is generally the amount used to determine tax status which is level you are taxed at and the credits you are eligible for. Adjusted Gross Income (AGI) does NOT equal your salary (or combined salaries).
AGI is calculated by adding together all income producing activities (some of the more common activities include income from W-2's, interest income, dividends, state or local tax refunds, self-employment income, rental income, unemployment, pensions, alimony, annuities, IRA distributions). Sometimes when a person is just starting a business or has just recently rented out a property they net a loss in one of the areas, bringing down their income before even taking any of the adjustements to income which reduce income (some of the more common adjustments that some qualify for include moving expenses, 1/2 of self-employment, alimony deduction, IRA deduction-this is in addition to the 401(k) through an employer, and student loan interest deduction).
One should know that the amount that appears on your W-2 for tax purposes has three major missing pieces that, if added back in, will equal your actual salary. The first piece is the amount taken out of your salary for retirement. The second piece is the amount taken out to pay healthy expenses with pre-tax dollars (i.e. the excess in your health premium + the amount placed in a Health Savings Account). The third piece is the amount taken out to pay for dependent care expenses with pre-tax dollars (i.e. child care to a legal day care or nanny).
- Some extraneous information: Once AGI is determined, there are a number of reductions taken to determine the amount of income that is actually taxable. The first is either the standard deduction or the itemized deduction (which includes state and local taxes paid or sales tax paid, mortgage interested paid, charitable gifts made, and property tax paid). The second reduction is the exemptions which vary by household size. After the taxable income is determined, credits are taken out to reach an actual taxable amount. It is quite possible that a household may command $100,000 in salaries, but only be taxed on $50,000 and after that they may still qualify for various tax credits. Credits are reductions of the tax owed.
AGI is the important number needed to determine eligibility for tax credits. It is impossible to know how many people will qualify for a tax credit at the state level because it is impossible to know each family's unique tax situation. The main thing to remember is that AGI and actual salary are two completely different animals and it is very possible that a family earning $90,000 or even $100,000 will qualify for this tax credit after all adjustments to income have been made.
So now that I've gone through all that confusing information, I hope you understand that many people WILL qualify for this credit. And, it is difficult to determine who will qualify and who will based on salaries and perceptions. Tax is like a puzzle and each puzzle is cut differently.
Seeing that this post has already went from a manageable read to a massive read, I will take a break and come back to talk about the other two very important aspects as to why New Yorkers should support the NYS Teach's tax credit.
17 comments:
Are you sure that eligibility is based upon AGI?
Also, I don't mean to suggest that the tax credit isn't helpful, just that many frum families in which both parents work won't be eligible.
Tax credits normally are based on the AGI. Go take a look in your IRS 1040 booklet at the Child Tax Credit worksheet for an example of this.
In general, state tax law follows the federal format with a few adjustments made to AGI based on state law. I see no reason why this tax credit will be any different, although I have not personally read the legislation.
Usually the state AGI is different from the federal AGI because of adjustments. My experience is that the state AGI's tend to be lower that Federal ones as typical adjustments include a subtraction for the prior year's state refund, interest received on federal saving bonds, and money placed into a state administered 529 College Savings plan.
In addition, I don't doubt for a second that many, many families will benefit and they deserve our support!
Very few here in Riverdale will qualify.
addition, I don't doubt for a second that many, many families will benefit
Depends how you define "many, many". In Florida, a similar plan benefitted about 800 students a year. And Florida has more failing schools with almost the same population. Problem is that most families that live in failing school districts can't afford private school tuition and $500 won't make a dent in it. Take a look at the Arizona plan. There many students get full scholarship even though tax credit is still only $500 ($850 per family).
Joecool,
Let's not mix up Florida's (now unconstitutional) voucher program with tax credits.
Let's not mix up Florida's (now unconstitutional) voucher program with tax credits.
The fact that that Florida program was ruled unconstitutional, is irrelevant to me. My point is that it was ineffectual and a sham. As currently proposed, NY program is also a sham. It will do nothing to help families that are hurting.
Joecool,
Please support your accusation with an example.
It's not an accusation. However, if you analyze it without emotions, you'll see that not a single penny from this will plan will go toward yeshiva tuition. Some have focused on the notion that most jews will fail $75K threshold. Maybe, mabe not. The requirement that the local public school must be a "failing" school is what will doom this plan.
As I said, look at the Arizona plan. It has been hugely successful, has passed legal challenges, and it allows the entire community to participate.
JoeCool, could you send us a reference to the "Arizona plan", including statistics on the number of Jewish students who benefit, and how much money the families receive?
'Florida program was ruled unconstitutional, is irrelevant to me'
It is also irrelevant here because the decision was based on a uniformity provision in the state constitution; the New York constitution contains no such provision.
Does anyone have a link to the failing school districts in New York? I'd like to post the link.
Thanks.
JoeCool,
You have ALL your facts wrong here.
First your faux pas with Florida.
Now you say that the failing school district provision is what will doom this proposal. Well, perhaps you'll reconsider after hearing the following: all of New York City is considered a failing school district and, I believe (though I'd have to double check) Nassau County's is, too.
So which other areas would you like to be declared failing in order for it to be a worthy program in your presumptuous mind?
charliehall,
You can get most information here: http://www.azdor.gov/ResearchStats/private_schl_credit_report_20051.pdf
There are 3 jewish scholarship funds:
Jewish Community Day School Scholarship Fund (orthodox and non orthodox schools in Phoenix)
Cheder Scholarship Organization (orthodox in Phoenix and Tucson)
Chabad Tuition Organization (orthodox in Phoenix and Tucson) supports same schools as Cheder
Keep in mind that jewish population in AZ is tiny.
The basic rules are: Single taxpayer can donate $500 ($1000 couple filing jointly) to a student tuition organization. STO must be willing to offer scholarships to at least 2 schools and use 90% of donations for actual scholarships. There is a separate and similar tax credit available to those who want to donate to public schools. At this point, businesses can't participate.
To my mind there are three advantages to such a program. (1) Involves the entire community and not just parents in giving. (2) Schools can't set up a closed system that drive all the money to a single school. (3) While individual tax credit is relatively small, it can be agregated to provide meaningful scholarships.
You have ALL your facts wrong here.
First your faux pas with Florida.
Now you say that the failing school district provision is what will doom this proposal. Well, perhaps you'll reconsider after hearing the following: all of New York City is considered a failing school district and, I believe (though I'd have to double check) Nassau County's is, too.
What faux pas???
If you think that ALL of NYC schools will be considered failing (i.e. 1/2 of NYS) for the purposes of the credit, you are fooling yourself. Plus, you have not seen Florida schools. To quote a great New Yorker, you're entitled to your own opinion, but not your own facts.
Joe,
You really should get out there and read a bit more so that you actually know what you're talking about beyond the silly rhetoric you spew.
New York City public schools are, in fact, considered failing. That's the basis for the CFE lawsuit!
Therefore, every family in NYC that earns less than $75G under the Governor's proposal would be eligible for the tax credit.
Of course, in your ideological opposition to the tax credit you're not willing to open your eyes and acknowledge the facts.
What a shame.
Lastly, as anon pointed out before, get beyond Florida because you're merely trying to pull the same wool that covers your face over the eyes of other readers on this blog. By comparing vouchers to tax credits, and Florida law to New York State law, you are doing nothing but further diminishing from your own credibility. Quit while you're still just barely ahead.
Where did you get that I am ideologically opposed to tax credits? I am not. I am only saying that "failing school" test will be a way used to gut this program of any practical meaning. You disagree? Fine. Check with me in a couple of years.
The most prominent feature of the Florida was the "failing school" test. That's the reason that only 800 students were taking advantae of it at the beginning of the school year. Vouchers vs taX credits? So what?
You want to invest effort into the program that will help a tiny handful of families? That's you right. It still won't do what you hope it will do.
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