Tax Incentives

This was in response to a question in a Builder Forum concerning the $1500 tax incentive for 2009 and 2010:

Tom, I've heard that from several vendors who were selling windows and insulation that the client really was doing this regardless of the cost because they wanted the tax "break". Many were spending thousands of dollars to save a small portion on their yearly tax burden. A one time benefit that they could easily have recouped by just putting the money in an IRA. Thankfully you were able to see the benefit of this "break" from the government and I hope that your business is able to generate the same numbers without the incentive.

No taxes have been cut though. Is your tax burden smaller this year? Assuming you are the business owner did your FICA, MCARE, and Fed Tax burden go down? I expect not. Will you be paying a smaller portion of your income to taxes in April? Again, I expect not. $1500 is about $30 a week for the wage earner. Would cutting payroll taxes by a small percentage create a greater "stimulus" in the marketplace? Maybe; but it would not be targeted and therefore not benefit the chosen industry regardless of who in Washington controls the purse.

What may be truly interesting is did these purchasers pay for the service with cash or did they finance it? What is the cost of that financing over the near term? Does it outweigh the benefit of the $1500? Do you truly save on your heating, cooling, or electric bill just just by replacing a window when this if factored in? Was just the sash replaced or was the trim removed and the jamb space air-sealed? Have the plate to sub-floor or plate-to-plate connections been air-sealed? Was the siding removed and a building wrap installed? In my own home air-sealing the furring cavity at either the attic or the crawl is the way to go; how many do this? Is the client willing to have a PV array large enough that it will truly give back to the grid? Or are they just cutting a monthly bill? Does this return on investment depend on your cost per kwh? Sure does. I installed an on demand hot water heater three years ago. Currently I am ahead on the electric bill by $6. At that rate it may take 750 years to pay back. I suspect I'll have to replace it by then so will it ever be cost effective? BTW - Electric rates in Virginia are some of the lowest in the country.

Potential short term benefits will come from Government action in regards to increases in consumerism on a macro economic scale when an item otherwise out of the reach is provided at a lesser cost. (Why do you think Going out of Business sales work so well?) These benefits will end when the incentive ends with nothing lasting created because there was nothing lasting to begin with.

It's too bad that your thriving business cannot sustain more employees with this incentive from the Government. It would seem that all that has been accomplished by the Government borrowing this money has been to keep you employed during this downturn. While I think that is a worthy goal I would still rather have my $30 back.

As I said I hope your business continues to grow and that you are able to prosper. Good luck!

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www.cshadedesign.com