No Tax Holiday for the Working Poor: 42% of taxpayers will actually pay more taxes in 2011!

[Better Believe It]

No Tax Holiday for the Working Poor
There's not much to celebrate with Obama's tax deal.
By Karen Dolan
December 27, 2010

Let's hold the confetti for a minute and take a closer look. Just because the deal was better than no deal, that doesn't mean it was a good one, even given this difficult political climate.

In addition to non-stimulative and expensive tax cuts and estate tax favors for the wealthy, this package has another poison pill in it. In the 2009 Recovery Act, the Making Work Pay provision gave those of us making less than $95,000 annually ($190,000 for couples) a refundable tax credit. Income above that level didn't see a tax credit. It was progressive. Those most likely to use the money, stimulating the economy, received the money.

The new tax deal replaces this Making Work Pay credit with the Payroll Tax Holiday.

According to the Center on Economic Policy Research and the Tax Policy Center, a little more than half of tax-filers will indeed get a bigger paycheck due to a tax holiday than they would have under the Making Work Pay credit. However, about 42 percent of taxpayers will actually pay more taxes in 2011 than they would have if the Making Work Pay Credit had been extended.

Read the full article at:

http://www.otherwords.org/articles/no_tax_holiday_for_the_working_poor#

[Foo Fighter]

1. Why do you hate Obama? n/t

[Better Believe It]

4. You're joking. Right? Do you think the writer hates Obama?

[Foo Fighter]

35. LOL, yes, of course I was joking.

And besides, I was referring to you as being the hater, not the writer of the article. ;)

I thought the intent of my post was obvious but I guess not. My bad. I'll add the sarcasm tag next time.

[xchrom]

2. recommend

[gratuitous]

3. Again, was the deal actually better than no deal at all?

I remain unpersuaded.

[Hannah Bell]

7. me too. the poor pay more, but it doesn't bring significant revenue.

[gratuitous]

17. Not to mention

That with the increased revenue realized by taxing the wealthy an extra three cents on the dollar, we could have funded quite a few programs, programs that are now on the chopping block because we ain't got the money to pay for them. Well, I'm sure the new Republican majority in the House will act reasonably and responsibly in contemplating any cuts to the federal budget. This is probably an appropriate time to mention that I believe in the Easter Bunny.

[Statistical]

13. Slightly higher taxes vs significantly higher taxes.

[aquart]

14. For WHOM?

Significantly higher taxes for people who are TOO RICH to begin with?

BTW, that idiot saying of the Duchess of Windsor: "You can never be too thin or too rich" was untrue. Ask people who are starving (something she knew nothing about)or have anorexia (although anorexics would agree just before they dropped dead).

No man should be so rich he has nothing left to buy but his government.

[Statistical]

15. No the people in the 42% stated in the OP.

With compromise. Slightly higher taxes. Without compromise significant higher taxes.

[Hello_Kitty]

27. The deal is done. The bill was signed. eom

[Statistical]

29. And Obama signed it because....

compromise: slightly higher taxes.
no compromise: much higher taxes.

How much is slight. Here is a nice algebra equation.

Net change in taxes from loss of MWPC and gaining 2% payroll tax.

For income <$6800 (ineligible for MWPC):
Net change = 0 -(gross pay) * 0.02

For income >$6800 and less than $106K:
Net change = 385 - (gross pay) * 0.02

For income >$106K:
Net change = Capped at -$1720

So for example someone making $17,500 would face a tax increase of $35.
Without the compromise they would face at a minimum $400 (loss of MWPC) + $412 (loss of 15% bracket).
If they had children they would face +$400 per child, and if married would also face marriage penalty of $128.

So $17,500 income.
Compromise Bill: $35 increase in taxes
No compromise Bill: $812 to $1440.

[Hello_Kitty]

30. Letting the tax cuts expire is not a possibility at this point

So when you revert to that as the basis for your argument, it's a sign that you don't really have a valid justification for this. It's okay. It's unjustifiable. It was a colossally stupid oversight on the part of the admin in crafting the deal and then Dems in Congress dropped the ball by not fixing it when they had the chance. You may think saying "shut up, it could have been worse" will make this go away but it probably won't. This could turn out to be a PR nightmare for the President.

[Statistical]

33. Hardly. For more people the difference is negligble.

It bought a year of UI.

Most people knowing UI is available means more than an extra $3.16 per paycheck.

I agree it is a PR stupid move and a huge oversight but I doubt it was maliciously intended.

[Better Believe It]

41. Opening the door to the destruction of Social Security. That's some compromise!

[ThomCat]

43. Yet it is still is still interesting that

this is being called just a huge tax cut. Implying that everyone gets a tax cut.

Income is largely a Pyramid. There are a hell of a lot more at the lower levels, the farther down you go, the more people you find. So this deal, which raises taxes for many of the poorest people, while cutting taxes for middle class and rich people, is probably raising taxes on a larger group of people than those who will get tax cuts.

Yes, the compromise lowers the amount of the tax increase for poor people, but it is still an increase, and it is an increase hitting lots of people who should have received help instead of an increase.

This should be called a tax shift instead of a tax cut. It is continuing the decades long shift of money from poor people to rich people.

[Bandit]

51. Fiscal Responsibility verses Fiscal Irresponsibility

No stimulus yet huge increase in both National Debt and Deficit..

[sendero]

20. Don't tilt against the illusion..

... that Obama gives a shit about anyone but rich people. Some folks around here just cannot come to grips with the FACT that Obama is a smoother talking Bush.

[Hello_Kitty]

26. No deal at all is no longer an option. The deal was done.

Having a large segment of workers with less money in their pockets in 2011 than they had in 2010 is not terribly stimulative, is it? It was a stupid boneheaded mistake on the part of the Admin to not notice this. And the Dems in Congress foolishly chose to focus on the estate tax rather than amend the bill to correct it. All they would have had to do was expand EITC or reinstate a partial MWP credit to make up the difference. But no, the response has been mostly "Shut up, paupers, it could have been worse!"

[gratuitous]

31. Obviously

However, the statement keeps being made that this lousy deal was better than no deal. Clearly, a deal was made and there's no going back; but was this deal better than no deal at all? I say no, and I intend to keep saying that, because the deal that was struck was worse than no deal.

[Statistical]

34. How do you figure?

[jtown1123]

53. He could have gotten the Republicans to vote on a unempoyment package

as a stand alone item. That would have scared them into doing the right thing. There is no reason it needed to be wrapped up with the tax cuts.

[Statistical]

5. Bogus stat.

"However, about 42 percent of taxpayers will actually pay more taxes in 2011 than they would have if the Making Work Pay Credit had been extended."

The Republicans were unwilling to extend MWPC. Without the compromise taxes would have gone up much much more on 100% of taxpayers.

[hfojvt]

8. without the compromise, it would have been Republicans fault

with the surrender, it is now Obama and the Democrats fault. Republicans fought like hell to avoid a tax increase for the rich. On the other side, Obama and the Democrats hardly fought at all to avoid a tax increase on the poor.

How nice that the compromise for US involved - extending Bush tax cuts for the rich, and estate tax cuts, and yet we could not get THEM to give up an extension of the Making Work Pay credit.

Instead Obama wants us to cheer for the payroll tax holiday which is skewed upwards.

[Better Believe It]

10. "The Republicans were unwilling to extend MWPC" When did they win control of the government?

So it appears that Republicans set the agenda when they are both out of power and in power!

[Statistical]

12. No but it takes 60 votes.

The Republicans would have gladly extended ONLY tax cuts for rich.

The Democrats would have gladly extended ONLY tax cuts <$250K (and failed twice).

Neither side could get what they wanted without 60 votes.

[sendero]

21. Another meaningless non-sequitur..

.... from you. We're familiar with the "Repugs won't do it excuse". So fucking what?

[Statistical]

22. 60 votes.

The Senate tried passing 2 bills that extended only tax cuts up to $250K and up to $1 mil. Both were defeated.

So in the absence of at least 3 Republican votes nothing would be passed and Obama would go down in history as being responsible for the largest tax increase on the poor & middle class. It would just be gravy to his enemies that it happened during the worst recession in 80 years.

Tax cuts for the rich were the cost of getting UI expansion, 2% payroll tax holiday (which is at least a partial replacement for MWPC), and tax cuts for middle class and poor.

Maybe you can say it was a "bad price" but Congress didn't seem to have anything that would sweeten the pot enough to gain 4 votes. The sad reality is that Republicans are much better at the "game" of politics. They can close ranks, and hold firm to gain concessions because they know 56 votes is useless without 4 more. 56 votes might as well be 51, or 38 unless you give enough to get over the "magic 60".

[sendero]

32. Politically...

.. it would have been BETTER to have let it go down, and spend the next two years talking about it.

But that is well beyond your or Obama's ken.

[Statistical]

36. Politically maybe, but not better for the country, not better for the unemployed, not better for

middle class and poor.

However you are right despite the awesome damage it would have done it might have been a net positive from political point of view.

That is why I am glad Obama compromised.

[sendero]

37. With most poor people..

.. paying more taxes, I don't know how you can say that.

Just one more DUer defending the indefensible.

And BTW - did it ever occur to ANY of YOU that had Obama called their bluff THEY would have folded? Ever?

No, because in your world the people must always lose.

[Statistical]

38. No compromise means poor would be paying SIGNIFICANTLY more taxes.

No I doubt the Republicans would have folded. Obama polls were down, the Republicans are masters at controlling the message.

Come Jan 1 every single American would have a smaller (and significantly smaller) paycheck and the Republicans would be saying "see we wanted to extend the tax cuts AND give you a 2% payroll cut" but the Democrats wouldn't allow it.

Obama decided (right or wrong) he wasn't going to let the tax cuts expire. The Republicans knew that and they are much better at the game of politics.

"No, because in your world the people must always lose."
How did the people lose? I see it as a win. Aggregate Demand will increase by roughly $300B next year. People aren't facing a huge tax increase. People on UI can stop worrying knowing the benefits will be there until end of 2011 rather than worry each month if it will be extended or if the check will be late.

Is it perfect? Hell no. Nothing in the real world usually is. Is it a win for the economy/country/Obama? Without a doubt.

[NickB79]

54. Sorry, but that sounds a bit too like enabler talk

Like giving someone another hit of heroin because they're going through bad withdrawal and you can't stand to see them in pain, but all you're doing is preventing them from getting clean.

Extending the Bush tax cuts for all Americans may be better for us in the short term, but in the long run it could well lead to the destruction of numerous facets of our society that progressives have worked so hard to put into place since the 1930's.

I'm starting to think that maybe we need a bit more pain and hardship placed upon us on a daily basis to remind us to take more seriously our choices for who we elect to run this country. Either that, or there is no hope to turn this ship around and we've just become too stupid to exist as a nation any longer.

[Hello_Kitty]

25. Which still leaves people who earn less than $20K paying more in 2011 vs 2010

And the compromise is a done deal so you don't get to use "it'll be worse if the tax cuts expire!!" The tax cuts didn't expire. Let's live in the present.

[GReedDiamond]

6. I followed the link, but the page now "couldn't be found"...nt

[Better Believe It]

11. Here's a different link to the same article.

http://www.commondreams.org/view/2010/12/27

[GReedDiamond]

16. Thanks, BBI, I appreciate that...nt

[Better Believe It]

18. No problem. I don't know why the first link stopped working.

[somone]

9. Ahh. The Great Compromise = Fuck the poor on behalf of the rich

And we're supposed to be grateful?

[pnwmom]

19. The Making Work pay credit was always intended as a one-shot stimulus.

It wasn't intended to go on forever.

The real question is what the taxes would have been the new bill hadn't passed, and we were left with the tax schedule as it was in 2001-03.

[TheKentuckian]

23. Neither were the Bush cuts but here they are.

The point is that the most at risk will have more asked of them next year than this one and they have less and less.

If the objective is to simulate the economy then it would be crucial that the bottom earners have more money and they won't. The objective is to grease the palms of the top earners and their highly paid professional class and hold the comfortable suburbanites.

[Statistical]

24. At a minimum.

Anyone making more than $6800 (or more) would see a $400 increase due to expiration of MWPC.
Anyone making at least $8,375 (or more) taxable would see a $418.50 tax increase due to expiration of 10% bracket (first $8,375) would be taxed at 15% instead of 10%.
Anyone married would regain the "marriage" penalty and would face $200 to $5700 tax increase due to smaller married filing jointly brackets.
Anyone with a child would see a $400 per child tax increase due to replacement of $1000 tax credit with $600 tax credit (low income would be hurt more because the $600 older credit was no full refundable).
Anyone in the 25% bracket would see taxes rise to 28%.
Anyone collecting EIC would see it fall roughly 15% - 28%.

So yeah in nominal terms it isn't a huge tax increase but for someone struggling to make ends meet it would be like getting a 5% to 10% paycut as updated witholding tables made their paychecks shrink.

Combined $180B in aggregate demand would be destroyed likely leading to further job cuts as companies scale back in face of falling consumer demand.

[pnwmom]

42. I don't know where you got your statistics,

but they're different from the ones at the link. (Center for Economic and Policy Research)

According to the Center, the increased annual amounts paid by those at the lower end of the pay scale will range from $39 to $197.

This comparison, however, is between what is owed in 2010 -- which was scheduled to end at the end of the year -- and what will be owed under the new bill. It doesn't take into account the increases that were scheduled to take place in 2011 with the expiration of the 2001-3 tax cuts.

http://www.cepr.net/index.php/blogs/cepr-blog/the-tax-cut-deal-and-low-wage-workers

I agree that it is a shame that there is any increase at all, but we are talking about a range from less than a dollar a week to less than four dollars a week -- and comparing 2010 taxes (which were automatically expiring) to 2011.

[Statistical]

48. I think you misunderstood.

The question asked was how much would taxes go up on lower income citizens IF no bill had passed and everything expired.

The simple answer... a lot more. For more details see the post above.

[pnwmom]

52. You're right -- thanks for the clarification, and the numbers. n/t

[Hello_Kitty]

28. No, that is not the real question.

The tax cuts did not expire. The deal was made. The President signed it. People making less than $20K will pay more taxes in 2011 than they did in 2010. They will start seeing slightly less money in their paychecks starting next week. The lowest paid workers. Perhaps, "shut up, paupers, it could have been worse" is not the best way to respond.

[Still a Democrat]

39. Worst case, we're talking about $3.90 a week. C'mon.

The stimulus provided relief and the Holiday is, worst case, virtually the same.

[Hello_Kitty]

40. Yeah, and it's just the paupers anyway. Who cares?

It's not like it was a glitch that affected affluent white Republicans.

[Better Believe It]

44. What economic stimulus are you writing about?

The Economy in 2011
By: David Dayen
December 26, 2010

For example, for all the ballyhoo of the tax cut deal, for the most part it extends current law into 2011 (and in some cases, 2012). The income tax rates stay the same. Estate taxes are a net increase from their elimination in 2010. Unemployment insurance basically remains in place for those who already get it, and is not granted to the 99ers. The same for the refundable tax credits and most of the business tax extenders. Several safety net measures which were in place for at least part of 2010 go away in 2011, such as increases to Head Start, food stamps and child care programs, the TANF emergency contingency job subsidy, COBRA subsidies and that extra $25 a week for unemployment checks.

The payroll tax cut provides twice as much stimulus as the Making Work Pay tax credit, but importantly, it’s worse stimulus, as more of it goes to people at the high end of the income scale, who are more likely to save it. The bonus depreciation for new investment does increase over current law, and while it’s hard to give that a number, let’s call it $30 billion. Add that to the $60 billion extra from the payroll tax credit, and you’ve got $90 billion in total real stimulus from current law. Now, the National Conference of State Legislatures are predicting $110 billion in state and local budget gaps in 2011, which will have to get offset by spending cuts or tax increases. That’s actually better than 2010. But what it means is that BEFORE YOU EVEN GET TO THE REST OF THE FISCAL YEAR 2011 BUDGET, you’re at a net negative for government stimulus. And of course, there are several opportunities for Republicans to force near-term spending cuts throughout the year.

http://news.firedoglake.com/2010/12/26/the-economy-in-2011/

[Still a Democrat]

47. Oh goodie another brilliant firedoglake analysis

I was talking about the first stimulus package, BTW.

Anyway, Hamster's group now says subtract state and local government shortfalls from federal stimulus dollars? They have tax and spending structures of their own. The dead enders are becoming laughable the way they twist in the wind.

[Statistical]

50. The payroll tax holiday is $120B not $60B. n/t

The median household income in US is $44,000. A 2% payroll tax is $880.

114 million households in the US. Even if we exclude those with income > $100K (roughly 15%) that is around 96 million or so households gaining an average "pay increase" of $880. That is about $90B in stimulative effect (excluding the so called "rich").

[bullwinkle428]

45. Oh, but just the other day, someone was saying that the bottom

50% pay ABSOLUTELY NO FEDERAL TAXES at all, so why should this even be an issue?

;)

K&R.

[katnapped]

46. Exactly!

The poor should be used to getting fucked over so this should be no big deal! :sarcasm:

[TBF]

49. But Michael Vick is a great football player - why do you hate Obama? nt