Sorry: A $4,000 Travel Tax Credit is Likely Dead on Arrival
travel tax credit mcsally

Sorry: A $4,000 Travel Tax Credit is Likely Dead on Arrival

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The idea of a $4,000 domestic travel tax credit lit up the internet last week. The travel industry floated the idea as a novel way to reinvigorate travel companies and businesses suffering through coronavirus. President Donald Trump voiced his support. And, of course, travelers relished the idea of hitting the road on the taxpayers’ dime.

But then a lawmaker finally introduced a bill this week with that travel tax credit as Congress gears up for another round of coronavirus financial help.

And it’s not going over well.

 

 

Arizona Republican Sen. Martha McSally introduced the tax credit bill Monday called the American Tax Rebate and Incentive Program Act – or American TRIP Act. It actually goes even farther than previous proposals, giving individuals a $4,000 tax credit to cover eligible domestic travel expenses, joint tax filers up to $8,000, and allowing an additional $500 for each dependent child. It would cover travel costs from the start of 2020 all the way through 2021.

Republicans and Democrats alike immediately blasted McSally’s bill as out-of-touch at a time when millions of Americans are still out of work, encouraging travel as coronavirus cases are on the rise across the country.

The idea of another stimulus check remains popular, as does extending unemployment benefits and small business support programs. Meanwhile, McSally’s proposal was derided as a handout to the travel industry and wealthier Americans who could make the most use of the tax credit.

 

 

There’s no denying the allure of a travel tax credit. McSally defended her proposal as a way to help the suffering tourism industry.

“The tourism and hospitality industries were among the hardest-hit sectors across the country and their revival is critical to our economic recovery,” she said in a statement. “My legislation will help boost domestic travel and jumpstart the comeback of our hotels, entertainment sectors, local tourism agencies, and the thousands of businesses.”

But McSally’s proposal invites scorn by explicitly allowing the tax credit to cover travel, food, and beverage expenses at second homes – so long as that home is at least 50 miles from their principal residence.

And it’s a nonrefundable tax credit, which means it only kicks in if you owe federal taxes at the end of the year: a taxpayer who owes $3,000 could use the credit to reduce his/her tax bill to zero, while a taxpayer who owes nothing or gets a refund wouldn’t get a cent from it. That would generally benefit wealthier Americans that are more likely to pay more in federal taxes, leaving many low-income citizens out.

 

Bottom Line

A travel tax credit was always going to be a tough sell. But this bipartisan uproar makes it clear that unless if something changes, it’s not likely to go anywhere, period.

Perhaps it was too good to be true, travelers.
 

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