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Making Work Pay Credit Extension

This article was written by in Taxes. 8 comments.

The 2009 economic stimulus came to the middle class in the form of the Making Work Pay credit, which provided a $400 credit for single taxpayers or a $800 credit for married taxpayers filing jointly across two years. The credit was embedded in W-2 paychecks, hardly noticeable to many.

The credit was also designed to last throughout 2009 and 2010, automatically expiring in 2011, when the economy was expected to be in better shape. Without a congressional action to renew the credit, taxpayers will notice a lower net income on each paycheck when the year beginnings — lower than it would be anyway with the other taxes that start at the beginning of the year but are fully paid in the middle of each year.

Most of the recent talk about taxes is on the possible repeal of lower tax rates for those with adjusted gross incomes over $250,000, a move that would result in a 3 percentage point increase in just the highest marginal rate. This change would effect a tiny portion of American taxpayers, but if the Making Work Pay credit isn’t renewed, all single taxpayers earning $75,000 or less or married-filing-jointly taxpayers earning $150,000 or less will pay more. In terms of numbers, this credit benefits 90% of all taxpayers or 110 million households.

The credit costs $60 billion. That’s certainly a lot of money, but it’s small when compared to the cost of extending the tax cuts for individuals earning over $200,000 or couples earning over $250,000. That move would cost $700 billion, but pales in comparison with the $3 trillion cost extending the tax cuts for everyone else, an expense that can most likely not be avoided.

The Making Work Pay tax credit, as it allowed most taxpayers to spend a little more, may have helped support the economy’s feeble recovery over the past year. With the economy not yet fully recovered even though we are no longer in a technical recession, should the tax credit be extended?

Published or updated November 29, 2010.

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About the author

Luke Landes 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 Luke Landes and follow him on Twitter. View all articles by .

{ 8 comments… read them below or add one }

avatar 1 Anonymous

I think the obvious answer to most people here is going to be “yes”, and especially if you’re someone who would benefit from the credit. But I think you’re going to see fewer credits offered by the government in the next few years as a way for them to fund big ticket items like health care. After all, one way to make money is to stop giving it away.

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avatar 2 Anonymous

I think it’s more important that they fix the AMT. A few thousand will hurt us more than a few hundred.

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avatar 3 Anonymous

“The credit costs $60 billion. That’s certainly a lot of money, but it’s small when compared to the cost of extending the tax cuts for individuals earning over $200,000 or couples earning over $250,000. That move would cost $700 billion”

The 60 billion is this year only. The 700 billion is over 10 years. The costs of the two are nearly identical.

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avatar 4 Anonymous

exactly. misleading story.

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avatar 5 Anonymous

Congress sends Tax law changes to the IRS using a shotgun – they may hit their target but a few pellets always hit other things. Like the ATM, which has to be fixed every year, the Make Work Pay was sent with the same shotgun. In 2009 I received a W2 and check from a trust fund holding bonus receipts from 2008. It was my only W2 (I’m retired) and was a residual amount totaling $54. When I completed my taxes I saw a $3.00 Tax credit under making work pay. I didn’t do a lick of work for anyone (other than my wife) in 2009 so I was almost embarrassed to take it. But the alternative of not reporting a W2 might be worse. I know this doesn’t respond to your question but I just thought I could add a little humor here about my only experience with Make Work Pay.

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avatar 6 Anonymous

Yes it should be extended. 30.00 in my check helps more than you can ever understand. If this credit is not extended, it will hurt our family of 5. I must now buy my own health insurance. My husband’s employer has terminated my insurance coverage since I can purchase it from my employer whereas his was part of a benefit package. So I will start out the year with my paycheck being aproximately $100.00 per month less and with 3 kids in college this could not come at a worse time. So yes, it should be extended. I cannot understand how they can compare an average family to someone who makes 250,000 per year. Tax them, they are not worried about whether to pay the heat or buy food!

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avatar 7 Anonymous

Wow, what a twisting of facts and outright misleading story. The $700 bill and $3 trill is over 10 years, but the author implies that the $60 bill is also over 10 years. WRONG—its one year, so the amount should have been shown as $600 billion. Not such a tiny amount anymore, is it?

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avatar 8 4hendricks

I think that doing anything that will lower people’s take home pay right now, will only tax the services that people are going to apply for to pay for food, housing, medical bills etc.

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