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One best example of incentive of taxation strategy is the Energy Policy Act of 2005 which offered consumers and businesses tax credit from the beginning of 2006 to buy fuel efficient vehicles and energy efficient appliances and products.
Now the idea of this incentive is not just people getting federal tax credits. It goes beyond that as it helps the nation in many ways. Fuel efficient vehicles and energy efficient appliances and products means better mileage, lower gasoline cost, less emissions, lower energy bills, and reduced air pollution.
In the US, because of the Energy Policy Act, many people became eligible for utility rebate, state rebate as well as state tax incentives just to have energy efficient homes, vehicles and equipment. However, each state has a different tax structure so people had to check their state’s website to see what benefits they were getting on account of the Energy Policy Act.
By having tax credits to their federal taxes, the government has made this incentive more attractive than tax deduction. This is because tax credits actually help to reduce taxes dollar for dollar, while a tax deduction only reduces a certain percentage of the tax the people or businesses owe to the IRS.
Just like the US introducing incentive of taxation strategy, there are many other countries who adopt the incentive methodology to motivate the people so that the country benefits as a whole.
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