Proposed Vacation Tax Credit Exposes Vacation Inequality

As the summer heat cranks up, the idea of a federal tax credit of up to $8,000 for vacation expenses sounds good. But the proposed tax credit is nonrefundable so that most working-class people would receive no or only modest benefits from it.

In a new analysis released by the Center for Economic and Policy Research, (CEPR), author Shawn Fremstad explains that the proposed nonrefundable tax credit or tax deduction for vacation expenses can only be claimed in full by wealthier taxpayers. However, this latest proposed tax giveaway to the wealthy "shouldn't blind us to the fact that annual vacations are a necessity, and that social policy has a legitimate role to play in ensuring that all people are able to take one."

"Progressives shouldn't shy away from using social policy to reduce vacation inequality," writes Fremstad. He proposes that questions about the ability to afford a vacation be added to federal government economic surveys.

Fremstad also documents how other wealthy nations have long-standing social policies that encourage vacations and reduce vacation inequality. One of these policies, vacation pay for workers, is explored in depth in the 2019 CEPR report, No-Vacation Nation, Revised.