Note: See update below. The tax cut is applied elsewhere.

Barack Obama campaigned on a promise to give middle-class Americans a tax cut as soon as he got into office.  Early this year, he enacted a cut that promised a $400 reduction in taxes through the hilariously named Making Work Pay tax credit program, and adjusted withholding tables to reduce the weekly tax bite by $13 to put the money in our pockets immediately.  Now the 2009 tax tables have been published, and the tax cut looks like half of what was promised.

First, let’s look at the tax tables for single filers in income levels between $5,000 and $65,000 per year, comparing the 2008 tables to 2009:

Taxable income 2008 Tax 2009 Tax Cut
$5,000 $503 $503 $0
$10,000 $1,103 $1,086 $17
$15,000 $1,853 $1,836 $17
$20,000 $2,603 $2,586 $17
$25,000 $3,353 $3,336 $17
$30,000 $4,103 $4,086 $17
$35,000 $5,100 $4,944 $156
$40,000 $6,350 $6,194 $156
$45,000 $7,600 $7,444 $156
$50,000 $8,850 $8,694 $156
$55,000 $10,100 $9,944 $156
$60,000 $11,350 $11,194 $156
$65,000 $12,600 $12,444 $156

As we can see, we’re solidly in the middle class, well above the national average income of $50,000, and the tax cut only comes to $156 — less than half of what Obama promised. However, some may claim that Obama promised that tax cut to middle-class families, which means we should be looking at the Head of Household columns instead.  Of course, the withholding got reduced on an individual basis, which means single filers will have more taxes to pay at the end of the year, but it’s a fair point.

This time, let’s look at the family tax rate difference between 2008 and 2009, all the way through to $88,000 per year.  That’s four times the poverty level, and it’s where the federal government would cut off health-insurance subsidies in ObamaCare if it passes.  Do we get $400 in tax savings per family for these middle-class households?

Taxable income 2008 Tax 2009 Tax Cut
$5,000 $503 $503 $0
$10,000 $1,003 $1,003 $0
$15,000 $1,681 $1,656 $25
$20,000 $2,431 $2,406 $25
$25,000 $3,181 $3,156 $25
$30,000 $3,931 $3,906 $25
$35,000 $4,681 $4,656 $25
$40,000 $5,431 $5,406 $25
$45,000 $6,319 $6,156 $163
$50,000 $7,569 $7,359 $210
$55,000 $8,819 $8,609 $210
$60,000 $10,069 $9,859 $210
$65,000 $11,319 $11,109 $210
$70,000 $12,569 $12,359 $210
$75,000 $13,819 $13,609 $210
$80,000 $15,069 $14,859 $210
$85,000 $16,319 $16,109 $210
$88,000 $17,069 $16,859 $210

No, we don’t. In fact, we only see slightly more than half of the promised savings through $88,000 incomes. Do we ever see $400 in income-tax cuts? Not on the 1040 tax schedules as printed, which only go to annual income levels of $99,000, and where the reduction remains $210 for families.

It looks like Obama has made Making Work Pay into a net cost at the end of the year for taxpayers.  Other tax credits will come into play, too, but the withholding relates directly to these tax tables — and it looks like Obama’s program forced everyone to underpay their taxes this year.

Update: I’ve gotten updates from two readers who point out that the MWP credit gets applied separately on the 2009 1040. It’s not part of the tax tables, as HA reader Hillary explains:

I don’t care for Obama either, but your article about the tax credit getting halved is incorrect. If you look on an 09 form you will see that you still get the $400 or $800per family. It appears separately below the total tax and separately on the return as a schedule M. The Making Work Pay credit was not built into the tax tables as you showed. So, technically people are getting the usual tax table adjustment for inflation of $156 PLUS the $400 or the $210 + the $800 for families.

And that’s good news for everyone. Thanks for the clarification.

Tags: Barack Obama