Obama plans to kill middle-class tax credit

posted at 1:30 pm on February 2, 2010 by Karl

According to The Hill, President Obama is not into Making Work Pay anymore:

Grappling to contain record deficits, President Barack Obama is seeking to end a middle-class tax break he once said would be permanent.

The $3.8 trillion budget request rolled out by the White House on Monday would renew the Making Work Pay tax credit for fiscal 2011, but then would have it sunset.

That’s a switch from last year, when Obama’s budget called for making the tax credit permanent.

The cut costs the federal government about $63 billion in annual revenue while putting up to $400 in the pockets of workers making less than $95,000.

Of course, the Obama budget is not “grappling” with record deficits so much as creating them. But it is hard to fault Walter Alarkon for that poor word choice when other establishment media (e.g., ABC News and CQ) are spinning this as Obama extending the credit for a year — despite the fact that last year’s budget called for making the it permanent.

In last week’s State of the Union speech, Obama bragged about cutting taxes for 95 percent of working families. Thus, by Obama’s own logic, he can now be accused of raising taxes on the middle-class. However, we should remember that technically, this refundable tax credit sent money directly to people who pay no income taxes. Obama promised “tax cuts,” but they were often outright transfer payments.

This particular credit was also a bit of a political embarrassment to the administration. The Making Work Pay tax credit may have been incorrectly administered to more than 15.4 million people, a large number of whom could find themselves forced to return portions of it, and even owe tax penalties. Even people getting the credit may not shed tears over its disappearance next year.

As King Banaian noted in passing while I was writing, the proposed axing of this tax credit is a timely reminder that — as Jim Geraghty famously remarked — all of Barack Obama’s statements come with an expiration date. All of them. It is also a reminder of how Obama views taxation — as something on which the government has first claim, to be redistributed or reclaimed at his whim.


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Comments

Ha! This could just be the tip of the iceberg. This story about middle class tax increases has been retracted and is to be rewritten by Reuters, but I can’t say that I’m confident that some, if not most, of the frightening provisions described here won’t ultimately be proposed by the Collectivist-in-Chief. It’s patriotic to pay taxes, and we all have to sacrifice, and all that. He can’t blame Bush for this one though.

Buy Danish on February 2, 2010 at 3:18 PM

I linked to that Reuters story on my local news blog this morning, only to find that it had been spiked. Fortunately, I found it and copied it and posted it before it disappeared entirely. Used it as an example of how the government is protecting our 1st amendment rights with transparency /sarc

winfield on February 2, 2010 at 3:24 PM

Grappling to contain deficits? He’s grappling with the deficit the way Bambi grappled with Godzilla!

MJBrutus on February 2, 2010 at 3:48 PM

Is there any government research regarding the laffer curve and what tax rate might generate maximum revenue for the government, or are they just playing this by ear?

DFCtomm on February 2, 2010 at 1:50 PM

I don’t know of any research into this directly, but I have seen studies that find that regardless of the marginal rate, govt revenues never seem to get much above (I think it was 20%) of GDP. To me this implies, the minimum rate gets you to 20% of GDP would also be the maximum rate.

MarkTheGreat on February 2, 2010 at 3:56 PM

That would seem to indicate that around 20% would generate the maximum return, so why isn’t the government attempting to determine max revenue instead of just debating if we’ll stand to pay just a bit more? It seems they don’t even know what their goal is.

DFCtomm on February 2, 2010 at 2:07 PM

During one of the debates, the moderator pointed out that raising the capital gains taxes would not increase revenue. Obama responded that he would do it anyway, because high marginal rates were more “fair”.

MarkTheGreat on February 2, 2010 at 4:00 PM

They are always a day late, and overly heavy handed. It’s something the government just isn’t good at.

DFCtomm on February 2, 2010 at 2:16 PM

Which is another reason why Keynes was wrong.
Relying on congress to time changes in tax and fiscal policies in order to fine tune the economy (even if it did work), is a fools errand.

MarkTheGreat on February 2, 2010 at 4:02 PM

–It’s a bit of a scam. If I remember correctly, Bush and Reagan did the same thing (immediately adjusting the withholding tables/rates) with one of their tax cuts. People think they received a raise and start spending it.

Jimbo3 on February 2, 2010 at 2:19 PM

If the tax rates have changed, why shouldn’t the tax schedules be modified to reflect that fact?

MarkTheGreat on February 2, 2010 at 4:04 PM

Why do democrat politicians hate productive and successful people?

daesleeper on February 2, 2010 at 2:24 PM

Because for the most part, there voters aren’t.

MarkTheGreat on February 2, 2010 at 4:05 PM

http://en.wikipedia.org/wiki/Jimmy_Carter_rabbit_incident

Barrack Pinnochio Hussein Obama makin this one termer look better everyday!
Miserable, Epic, Failure! Barrack Hussein Obama, Ummm, Ummmm, Ummmm!

dhunter on February 2, 2010 at 4:16 PM


Alan Viard
Reality Check on Taxes

By Alan Viard
February 2, 2010, 11:53 am

The Drudge Report today played up this article about coming middle-class tax hikes. Although Reuters has pulled the article, many people are still reading it at various websites, so it is important to note and correct its appalling inaccuracies:

OmahaConservative on February 2, 2010 at 4:28 PM

In the earlier thread on this I posted (with some corrections in this repost):

I’m trying to point out to my sister, the Seattle Democrat, that the “Evil Bush Tax Cuts for the Rich” helped me to the tune of around $1K. Something about that nice 10% bracket for the first 16K or so of income. I haven’t seen anything about that not sunsetting at the end of this year. Combine that with the loss of the $800 we get for a married couple with two jobs, and the %50 cut in the child credit (I’ve only heard talk about extending and expanding the child care credit) and we’re talking about raising my family’s tax liability by almost $3K next year (fiscal 2011). But hey, I’m in the middle quintile, so I guess I’m one of those evil rich people.

Although my sister informs me that we make little enough that we should be getting government aid.

Think about that. A family of 4 making around $75K a year should get government aid. (OK, $75K doesn’t go anywhere near as far in CT as it does in a lot of other places, but still!)

Of course she also informed me on Saturday that since I do not believe in health care reform, cap and trade, AGW, the benefits of mutli-culturalism, as well as believing that we shouldn’t treat non-citizen terrorists the same as citizen criminals, I am “delusional”, “mentally unstable” and “in need of an intervention”.

And I suspect that she won’t understand that calling me that in a public forum might have a negative effect on general family relations.

BuyDanish added:

Wow. I feel for ya. In her mind (the mind of a “progressive”) you are an enemy of the state and an “intervention” is a merely a euphemism for forced “indoctrination” at the nearest Stalinist-styled propaganda camp.

And I have realized how accurate that is, since one of her heroes (she uses a variant of his name as an online moniker) is Robespierre. The man generally viewed as the main impetus behind the Reign of Terror. Not really someone I’d want to be associated with, but hey, I’m just a knuckle-dragging, bible-clinging, hopefully-soon-to-be-gun-toting moron.

LibraryGryffon on February 2, 2010 at 4:31 PM

This reminds me of a passage from 1984, where Winston has received news that the weekly ration of chocolate was to be reset. If I remember correctly, the figure was to drop from 30 grams to 20.

Instead of announcing the news as a reduction, Winston burned the previous article stating the 30 gram ration and wrote a new article that claimed something like, “chocolate rations will now be as much as 20 grams per week”.

And the Proles ate it up, happy that Big Brother was to give them so much chocolate.

While I will always respect the Office of the Presidency, I regard the current occupant of that Office to be utterly unworthy of the title. November 2012 cannot come fast enough.

I hope he fails, but I am now becoming more and more afraid that when he does fail, he’s gonna drag us all down the sewer with him…

Wanderlust on February 2, 2010 at 5:42 PM

Of course she also informed me on Saturday that since I do not believe in health care reform, cap and trade, AGW, the benefits of mutli-culturalism, as well as believing that we shouldn’t treat non-citizen terrorists the same as citizen criminals, I am “delusional”, “mentally unstable” and “in need of an intervention”.

LibraryGryffon, sounds like major league projection. Very typical of the unhinged left.

Hard Right on February 2, 2010 at 5:50 PM

Frankly, I see no reason for people who earn $94,999 to get a $400 tax credit. I have family members who make well over $100,000/yr and end up pocketing tax monies others who earn far less have paid because of all the tax credits they can claim. I have a real problem with this. There are far too many people in this country right now who have no responsibility for paying a share of the freight.

SukieTawdry on February 2, 2010 at 5:54 PM

And I have realized how accurate that is, since one of her heroes (she uses a variant of his name as an online moniker) is Robespierre. The man generally viewed as the main impetus behind the Reign of Terror…
LibraryGryffon on February 2, 2010 at 4:31 PM

Terrific. Have you ever suggested that perhaps she’s the one in need of an intervention? Maybe she and Anita “Mao” Dunn could go to Ruthless Tyrant Rehab together.

Buy Danish on February 2, 2010 at 6:09 PM

Although my sister informs me that we make little enough that we should be getting government aid.

Think about that. A family of 4 making around $75K a year should get government aid. (OK, $75K doesn’t go anywhere near as far in CT as it does in a lot of other places, but still!

)

…that’s bad.

When the average American’s finances are in the same shape of position of a Wal-Mart abuse receptacle, you KNOW our nation is in serious trouble.

Dark-Star on February 2, 2010 at 6:18 PM

If the tax rates have changed, why shouldn’t the tax schedules be modified to reflect that fact?

MarkTheGreat on February 2, 2010 at 4:04 PM

And that is the interesting part about that “extra” money the middle class will see in their paychecks. They just have to give it all back come April.

Koa on February 2, 2010 at 6:42 PM

And that is the interesting part about that “extra” money the middle class will see in their paychecks. They just have to give it all back come April.
Koa on February 2, 2010 at 6:42 PM

Not all of them. Just about 15.5 million families with dual incomes, seniors who have a job and are receiving Social Security, people with dependents who earn wages, people working two jobs…

I look forward to the cumulative outrage on 4/15/10.

Buy Danish on February 2, 2010 at 7:20 PM

There are far too many people in this country right now who have no responsibility for paying a share of the freight.

SukieTawdry on February 2, 2010 at 5:54 PM

Yeah, but it ain’t the folks making $100,000 or more who aren’t paying their fair share …

Top 10% (AGI above $110,000), paid over 70% of income taxes in 2007: http://www.ntu.org/main/page.php?PageID=6

Stegall Tx on February 2, 2010 at 7:39 PM

I’d love to see someone come out on a No Tax platform to run for president.

Let DC go bankrupt and get it over with.

I fear, though, too many people are already on bennies or want them (Socialist Security, Medicare, Medicade, Unionized Government Employees, Clash for Clunkers, $8000 first time home buyer credit, CRA, Adjustable Rate Mortgages, Interest Only Mortgages, etc. etc.) that we are never going to go back to being a true Republic.

BowHuntingTexas on February 3, 2010 at 5:08 AM

When the average American’s finances are in the same shape of position of a Wal-Mart abuse receptacle, you KNOW our nation is in serious trouble.

Dark-Star on February 2, 2010 at 6:18 PM

Truth is, we really aren’t in that bad shape. Our problems are of our own making (credit cards are evil, evil, evil!) and we are slowly but surely climbing out from the hole that no one but ourselves put us in. And I’m scared witless that given what’s happening right now on the national level, we’ll end up back where we started or worse, making all that hard work and scrimping meaningless.

The other weird bit of what she said is, why should anyone assume that making a family making $75K should need assistance? Is it because we don’t own our house (we wouldn’t even look at houses when the prices were out of our range – no more than 2.5 to 3 times our annual income – silly us)? Because we have two cars but the *new* one is a 2003? Is it because we only have one TV, one computer, and none of the latest gaming stuff? We don’t eat out more than once a month? We don’t go out to movies or clubs or for drinks more than once or twice a year (except for the subase theatre since spouse is retired navy)? I don’t think any of that makes us “poor”. We still have more stuff, and nearly as much disposible income as my parents did at this stage, and dad was a university professor. Maybe Sister Dearest thinks we should have been on some sort of assistance then too.

I don’t feel poor. I feel temporarily cash strapped. Big difference. I fear that if we don’t stop the train the gov’t is on right now, we’ll all be feeling extremely poor, extremely quickly.

LibraryGryffon on February 3, 2010 at 8:34 AM

I don’t feel poor. I feel temporarily cash strapped. Big difference. I fear that if we don’t stop the train the gov’t is on right now, we’ll all be feeling extremely poor, extremely quickly.

LibraryGryffon on February 3, 2010 at 8:34 AM

We don’t have a poor problem in the U.S., we have a broke problem.

DFCtomm on February 3, 2010 at 10:37 AM

I believe you meant to say that “It is also a reminder of how Obama views income — as something on which the government has first claim, to be redistributed or reclaimed at his whim.”

Paul_in_NJ on February 3, 2010 at 2:03 PM

We don’t have a poor problem in the U.S., we have a broke problem.

DFCtomm on February 3, 2010 at 10:37 AM

A good way to think of it. And being broke doesn’t have to be a permanent condition, as long as the gov’t will get the h-ll out of the way and let us un-broke ourselves!

It seems like every “fix” we get from on high just makes it harder and harder to get ahead. There’s a country song with a line about every time he gets one rung up the ladder, someone cuts two rungs off the bottom. Which is a perfect metaphore for how the feds seem to be helping most of us these days.

LibraryGryffon on February 3, 2010 at 3:48 PM