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Making Work Pay Tax Credit Extension

This article was written by in Taxes. 17 comments.


The 2009 economic stimulus, usually called the Making Work Pay tax credit, provided slightly bigger paychecks for the middle class throughout part of 2009 and all of 2010. This benefit is in danger of expiring if Congress does not act to extend or renew the credit. This stimulus took a different form than those previous. In the recent past, the government sent checks to Americans for a lump sum, encouraging consumers to put that money directly to use.

Most people used the free money to increase savings or pay off debt, which may have had indirect stimulating effects, but the country remained in a recession. By spreading the credit out by including a small bump in each pay check, economists believed that consumers would grow accustomed to having extra money and the stimulus would be incorporated into everyday finances.

If the credit disappears, pay checks would decrease by about $15 every two weeks in 2011. This could be seen as a tax hike on the middle (working) class. Extending the credit for one year would cost the government, and therefore the taxpayers, $60 billion. Whether Congress could pass such a bill now is anyone’s guess.

Updated July 28, 2010 and originally published July 27, 2010. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 17 comments… read them below or add one }

avatar Jeff Schwandt

The GW Bush tax cuts are expiring. Taxes are going up for everyone and the marriage penalty tax is back. Bottom line, Congress and Obama are clueless about what makes the economy go and completely out of touch with most of the country.

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avatar JIMMY

IF THE DEMOCRATS HAVEN’T SEEN THE CITIZENS CRYING ABOUT SPENDING AND FOR TAX RELIEF, THEY WANT EVER. IT STRANGE THE REPUBLICANS ARE SAID TO BE A RICH MAN’S PARTY YET THEY GIVE TAX CUTS TO THE WORKING PEOPLE, SAME AS REGAN DID. THE DEMOCRATS FOR THE LAST FORTY YEARS THAT I’VE KEPT UP WITH ARE THE BIG SPENDERS WITH THE TAXPAYERS MONEY. FIGURE IT OUT FOR YOURSELF THE PROOF IS IN THE PUDDING.

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avatar Luke Landes ♦127,380 (Platinum)

If by “working people” you mean the wealthiest Americans whose income comes from investments or CEOs and other executives whose million-dollar incomes are approved by Boards of Directors consisting of other CEOs and executives, then yes, Republicans give these “working people” tax breaks. That’s what Reagan did (trickle-down economic theory).

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avatar Jenna

When is the deadline to make the decision?

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avatar Dan

I don’t think there is one. Congress can act whenever they want.

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avatar Jenna

Then what does “This benefit is in danger of expiring if Congress does not act to extend or renew the credit” mean?

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avatar Apex

Try this. Your drivers license has an expiration date on it. What happens if you renew your license prior to it expiring? What happens if you don’t renew it prior to it expiring?

This is the same.

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avatar Jenna

Well what is Congress date of expiration?

avatar Dan

@Jeff,

Can’t say I totally agree here, because the more money I make, the less and less I agree with the “just keep taxing the rich, they can afford it” mentality. They typically set the bar low enough where “rich” is really just middle class.

And the poor/middle class should start paying their fair share of taxes around here. (FWIW, if I didn’t get married last year, I would have had an $11k tax bill. And I’m far, far from rich.)

So I think everybody should share this burden, and it won’t be easy.

(My tongue-in-cheek response would be “the poor and middle class need to get a clue, start paying for what they use, and stop expecting the ‘rich’ to shoulder the burden.”)

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avatar Matthew

Amen brother. I would also stop referring to a tax cut as “costing” the taxpayers. How is having less of your money taken by the government costing you anything?

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avatar Got-A-Clue

Totally agree. I would add that from an economy-stimulating point of view, it makes a lot of sense to give big tax cuts to the rich and make the poor/middle class pay as much tax as they can shoulder. The poor/middle class don’t have a clue how to spend money, they are just not used to it. On the other end the rich’s got plenty of practice in spending their wealth and therefore helping the economy grow. The more the economy grows, the more jobs are created for the poor/middle class. Which in turn creates more tax revenue, Which means we can afford more tax cuts to the rich to create more spending, etc. Bush had it right. It’s a shame his tax cuts will expire because 8 years of them did so much good for the economy.

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avatar Luke Landes ♦127,380 (Platinum)

Jenna: The tax credit is designed for 2009 and 2010 only. If the increased paychecks are to continue in 2011, Congress needs to act before the end of 2010. They could wait until later than that or they could choose not to renew the credit.

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avatar Jenna

Thanks Flexo! That was what I was looking for. I’m going to assume 12/31/10 then. Will be interesting to see how this plays out.

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avatar Jessica Bosari

I definitely recommend getting a referral from a friend on this one. We lucked into an incredible dentist and ended up sending a friend his way. This friend had a lot of problems with his teeth and had been raked over the coals by several other dentists. Now he feels comfortable knowing the dentist is going to help him find the cheapest solutions to his problems and work with him to pay the bill. In my travels, I also noted that dental schools offer cheap care, if you have one near you. They are mostly in big cities.

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avatar Jessica Bosari

Oops, something went wrong! This was intended for the dentist article!

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avatar Jimmy Sylakowski

$30/month doesnt pay for full tank of gas.

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avatar Just thinkin'

Got-A-Clue, I suggest you study the figures for the Bush economy. You will find that the only thing that expanded at greater than average rates was CORPORATE PROFITS.
Gross Domestic Product, Employment, Wages, Non-Property Investments (stock market) were all below average. Cutting taxes for the richest segment of the economy caused deficit spending; Bush’s programs were still in place and sucking up money, but there was not enough money to pay for them. That’s why the budget went from $128 billion surplus to $1.4 trillion deficit. You might want to change your username.

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