IF PEOPLE DON’T like the way the police do their job, we don’t give them an income tax deduction for hiring a private security guard to watch their property. If they don’t think the garbage collectors are up to snuff, we don’t let them write off the cost of hiring their own contractor to haul away their trash.
So why would we give them a tax deduction if they want to enroll in a different identity-theft protection and resolution service than the one the state provides, as Senate leaders propose in S.334?
Granted, it’s not a very big write off: With most people paying less than 4 percent of their income in state taxes, the savings would be less than $12 for individuals, and less than $40 for families if they spent $300 or $1,000 for the service. So it would be crazy to claim the deduction instead of enrolling in the service provided by the state.
The problem is the whole idea of providing a tax deduction for identity-theft protection, which is just the latest attempt by legislators to confuse tax credits and deductions with government services.
Generally, we use tax deductions or credits to help people buy things that we want them to have but that the state does not provide. They are a substitute for the government providing a good or service directly.
We think it’s good for the whole community if people own their homes, but the government certainly isn’t going to buy them for people, so we offer a tax deduction to cover a small portion of the cost. We think charities do good work that benefits us all, but it certainly isn’t the business of government to fund them, so we let people write off their charitable contributions.
On the other hand, when the government determines that it has a responsibility to provide a service — be it police protection or highways or a court system or schools — it provides that service. Not a tax deduction. To do both is redundant and expensive, and usually unfair.
As much as we like to complain about government inefficiency, there’s no getting around the economies of scale of purchasing a service for 4 million people vs. purchasing it for one person.
The state is paying Experian $12 million to provide a year’s worth of credit monitoring. With about 1.5 million signed up, that comes out to about $8 per adult, and their minor children are eligible for the protection as well. It would cost the state up to $18 million if all 1.5 million adults who signed up instead bought credit protection and claimed a tax credit just for themselves. Double if all 3.8 million eligible adults signed up.
But of course not everyone would buy the protection, because many people don’t have the wherewithal to pay $300, or even Experion’s normal $159, up front. Even if they did, more than 40 percent of S.C. tax filers don’t make enough money to owe the $12 in state income taxes that they could write off. (That’s not to say they don’t pay taxes; they pay seven times as much of their income in sales taxes as do the wealthiest among us.)
Our Legislature seems well on its way to deciding that it has an obligation to provide identity-theft protection and resolution since it was the action of the government that put South Carolinians at extremely high risk for identity theft. As such, it is appropriate for the government to provide that service — not to reimburse 4 percent of the cost to those of us who can afford it.