The following memorandum is my response to the Board s directive. In the succeeding paragraphs I will attempt briefly to describe and to discuss something of tax credit history, research, analysis and their relationship to other public policies. Also, included in this memorandum is a listing of representative pros and cons. Attached to this memorandum is a table of pros and cons that may be used as a quick reference. Once again it should be noted that the table is representative and not exhaustive of the all of the possibilities.
Tax credits are one of many public policy options available to government.
Tax credit policy is as much behavioral as it is financial in nature. In the case of renewable energy technology the various tax credits that have been enacted over the years generally attempt to lower the actual cost of such measures to the ultimate consumer or to reduce the cost of investing in sustainable energy measures at an early stage of development. To do this the government permits taxpayers to reduce their tax bills. By offering these credits government is endeavoring to influence taxpayer behavior through the granting of a reward in the form of lower actual cost. For example, granting middle and lower income families a tax credit for childcare not only supports the development of a market for childcare services but also increases the number of wage-earners in the family, increases family income, decreases the need for public assistance and increases tax revenues to the government in the form of business and personal income tax payments.