Friday, December 10, 2010

"Obama-Republican Deal Could Mean Tax Hike For One In Three Workers"

"The tax deal ...could mean a higher tax bill for roughly one in three workers as a result of the Social Security tax cut Republicans pushed as a replacement for the current Making Work Pay tax credit.

The Making Work Pay credit gives workers up to $400, paid out at 8 percent of income, meaning that anybody making at least $5,000 gets the full amount -- and gets as much as anybody else. Its replacement knocks two percentage points off the payroll tax cut, meaning a worker would need to make $20,000 to get a $400 break. Of the nation's roughly 150 million workers, around 50 million make less than $20,000 and will see at least some increase as a result.

Additionally, roughly a quarter of 20 million state and local workers pay no payroll tax, because they have a separate pension system. Some of those workers with children will benefit from the extension of other tax credits, but overall will have less money in their pocket.

...Making Work Pay is a more effective stimulus, economist Dean Baker said, because a higher proportion goes to the poorest workers, who are most likely to spend it immediately. "Dollar for dollar, undoubtedly, Making Work Pay is going to be more stimulative. The higher-end people will get five times as much than someone earning $20,000"..."

Huffington Post

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