Obama's tax cut "deal" will raise taxes for lower income workers who make less than $10 an hour.

[Better Believe It]

Obama's deal will raise taxes for some low-income workers
By Chris Adams | McClatchy Newspapers
December 8, 2010

WASHINGTON — The tax deal struck this week between the White House and congressional leaders has a little bit for most taxpayers in the country. But some of the nation's poorest workers will actually end up worse off.

The president's proposal, struck in a deal with congressional Republicans, would lower the Social Security taxes on all workers in the nation by 2 percentage points.

At the same time, the proposal eliminates the "Making Work Pay" tax credit that was originally part of President Barack Obama's 2009 stimulus package and reduced Americans' taxes by up to $400 for an individual or $800 for a couple.

When comparing the Social Security reduction versus the current tax credit, middle- and upper-income Americans will fare far better under the new proposal. But some lower-income workers won't.

The break-even point is $20,000 for an individual and $40,000 for a couple. All other things being equal, make less than those figures in a year, and your taxes will go up come Jan. 1, 2011. Make more and they'll go down.

Read the full article at:

http://www.mcclatchydc.com/2010/12/08/104986/under-obamas-deal-taxes-will-rise.html

[xchrom]

1. recommend

[Horse with no Name]

2. Reprehensible.

The people that NEED the help the most will get screwed.
Of course, they have the least amount of money to pay off a Senator or two so they aren't important.
Obama should be run out of the WH for even CONSIDERING this crap.

[MadHound]

3. Yep, tax cuts for the rich, tax hikes for the poor,

And this entire debt that we're running up with this bill will be taken out of the hide of the poor, middle and working class when SS, Medicare and other such programs are gutted.

[katnapped]

6. Hey at least we got ...

A dreamy autographed photo of the CIC!

(what, you didn't get one either?)

[Riley133]

4. Single w/no kids

"Although low-income singles who don't qualify for certain tax credits will pay more, the White House said Wednesday it isn't fair simply to look at the impact of the Making Work Pay credit versus the Social Security reduction. Other provisions of the tax deal — such as the child tax credit — affect low-income families; when combined with the Social Security tax reductions, families will be better off under the negotiated deal."


GREAT! Now, if you're single with no kids and have no deductions.....

[katnapped]

5. You need to get another job and stop whining

And I guess I'll be in line right behind you.

The Waltons of the world don't have enough of our money, can't you see? :sarcasm:

[dkf]

11. And single people are more likely to be in poverty in their old age.

Maybe because they subsidize everyone else in their working years and can't afford to fund their own retirement.

[Hello_Kitty]

55. Yup.

It cracks me up when people say no low income people pay taxes. Um no, it's low income people with kids who don't pay taxes. I've paid every year of my working life including 2008 when my gross income was about $8000.

Not only are we more likely to be in poverty but we're typically denied public assistance until we're basically living in our cars. We're useful when we're earning money and subsidizing families but when we need help there's very little for us.

[Statistical]

19. If there is no compromise then all tax cuts reset.

At a minimum you are looking at
+$400 in taxes due to Making Work Credit expiring
+$300 in taxes due to 10% bracket becoming 15% bracket (on first $6000 in income).

[Riley133]

25. Flat tax?

Just out of curiosity (and judging by your name), what are your thoughts regarding a flat tax?

[Statistical]

34. Flat tax (if based on sales/consumption) is horribly regressive.despite its name.

It would further shift burden of taxation onto the backs of the poor & lower middle income Americans.

Personally I think there are some merits to the "fair tax" which issues a "prebate" each year effectively making the first $x in consumption tax free (if govt had a 20% consumption tax and wanted to make the first $40K in income "tax free" they would issue a "prebate of $4,000).

Still I doubt it has any chance of ever passing for 3 major reasons:
1) It is radically different and change is hard
2) It eliminates the system of favors and priveledges. If there is no income tax then there are no deductions how will people get special treatment?
3) It essentially makes it impossible for rich to reduce their share. Can't hide consumption and they will be taxed on it.

[Riley133]

35. Thanks very much for the response! (NFT)

[Hello_Kitty]

38. So you're going with the "well, it could be worse, pauper" argument I see.

What's your tax cut going to be?

[Statistical]

47. More than I want or need.

Still that doesn't change the reality.

What should Obama do?

No compromise? Democrats already tried that. A bill to extend only tax cuts for those making less than <$250K was defeated in Senate. Another attempt at $1mil mark was tried and defeated.

No matter how bad the compromise the reality is without 60 votes it will be 10x worse.

It sucks but that doesn't change the reality.

[Hello_Kitty]

49. I called my Congressman today and pressed him to amend this.

It's John Shadegg so pretty much pissing in the wind but if a lot of people brought this injustice in the tax plan to their attention they could fix it easily.

This portends of being a PR nightmare if it isn't addressed. Not to mention being unfair as hell.

[Hello_Kitty]

44. I hear ya on that, Riley.

Also the WH is wrong about the families anyway. All those child tax credits are what they're getting now. This plan just keeps them going.

[dkf]

7. Do people making less than 20,000 single/40,000 couple even pay taxes?

The payroll tax is likely the only thing they pay for Federal taxes and it will come back as social security checks later.

[katnapped]

10. Um, yea

And if not, I really gotta find out who I'm sending checks to April 15th every year.

[TheKentuckian]

12. Of course, all they have is the standard deduction. They net pay.

What does everybody start off with a house, married, and a kid?

[Autumn]

15. Why yes they do

my single 22 year old Daughter pays more in taxes than her Father and I do.

[hfojvt]

21. according to IRS figures from 2005

there were 11,635,684 filers with incomes between $10,000 and $15,000. Their average income was $12,481. They collectively paid $2.42 billion in federal income taxes, an averag of $420 (the Making Work Pay credit would reduce that by $400). There were 11,126,599 filers with incomes between $15,000 and $20,000. Their average income (AGI) was $17.463 and they paid $4.97 billion in Federal income taxes, an average of $829.

There were another 23.58 million with incomes under $10,000 but I have to believe most of them were teenagers with jobs. Even filers making under $5,000 paid $72.8 million in federal income taxes for an average of $90.

[Statistical]

22. It all depends....

at a very minimum everyone gets standard deduction & exemption.

That is $5,700 + $3,700 = $9,400 in "tax free" income (for someone single, no children, no other deductions & credits).

So if you make $15K, you are looking at $5,600 in taxable income. That would be $560 in taxes.

Of course **most** people have something to reduce taxable income. Student loan interest, eduction tax credit (for those in school), charitable deduction, IRA contribution, etc.

Still someone making $15K could AT MOST pay $560 in taxes so it is possible. When you consider the $300 from 2% payroll tax reduction that is net-net $260 in federal taxes on $15K in income (1.7% effective tax rate).

[dsc]

48. you don't get the standard deduction and the deductions you list

unless your expenses go over the standard deduction, highly unlikey, then you get just the standard. When my income was in that range I never had anything to write off. Honestly I still don't save the $250 classroom deduction teachers get and an IRA deduction.

[Statistical]

50. Student loan interest, IRA deduction, college credit, and child credit don't require itemizing.

You can claim standard deduction and still deduct student loan interest & IRA contribution. Once taxes are determined you can offset taxes by the college credit, child tax credit, and Saver's (IRA) credit.

I was wrong about charitable contribution. That requires itemizing.

[SOS]

26. Yes

I make under $20K and my taxes will be going up by $40.
I lose the $400 credit and gain $360 on the 2% payroll deduction. (Self-employed)

Net increase on a guy barely above the poverty level.

To hell with it. I really don't care anymore.

[Individualist]

27. Yes.

[KharmaTrain]

8. The Dirty Secret About Kicking The Can...

There's zero in this "compromise" about reducing the defecit, only increasing it big time. Besides the billions the rich will "save" and the loss of tax revenues, this is going to add to the bill due when this government can no longer borrow willy-nilly and taxes WILL have to be raised to make up the shortfalls or the government will begin to shut down. It's inevitable or we'll have to start deciding soon which government services we can do without.

This system is upside down as those who have the least are expected to carry the burdens of those who have the most and use the most services. And the pisser is when time comes to make cuts it'll be the poor and middle class who will be the first to take the hits (if they haven't already).

This "compromise" is a cop out...weakness on all fronts and defying the reality that this country is bankrupt and digging the hole even deeper that will make it harder for those at the bottom to ever see daylight.

[Dawgs]

9. And Rush will likely be able to keep hundreds of thousands of his money.

Great job Mr. President.

[stray cat]

13. Lawrence O'Donnell pointed this out to democrats and got reviled on DU

[Hello_Kitty]

39. When?

[LiberalEsto]

14. This is disgusting nt

[hfojvt]

16. ahem

I believe I said that first http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x9721446

and also included the number of people who will be affected - something like 20-30 million.

[Liberal_Stalwart71]

17. Can someone explain this to me? What's the difference between keeping the cuts entact

vs. letting it expire. If they were to expire, wouldn't the working class be the worse off, simply because their taxes are automatically increased?

If you're in the lowest tax bracket, you have less money to pay for those increased taxes, no?

[katnapped]

18. So in other words

Us at the bottom should be thankful we're not getting as screwed as bad as we could've been?

[Statistical]

23. No it is just the reality of the situation. Democrats don't have 60 votes without compromise.

No compromise = all tax cuts expire.

Someone single making say $15K.

Under compromise plan.
Loses Making Work Pay Credit +$400.
Gains 2% payroll tax reduction -$300
Net net taxes rise $100.

Under no compromise:
Loses Making Work Pay Credit: +$400
10% bracket becomes 15% on first 8700 in income. +$435
Net net taxes rise $835.

If someone is married (marriage penalty) or has kids (child tax credit $400 vs $1000) is gets even worse.

[hfojvt]

31. The second part should only be a rise of $282.50 not $435

The standard deduction + personal exemption is $9350, so a $15,000 person only has taxable income of $5650, although I, at least would also have the option of knocking that down to just $650 by making a $5,000 contribution to my IRA.

I think the other reality of the situation is that if we had stood our ground and taken it to the public, that Republicans would have caved before they allowed all those taxes to go up. That it was worth fighting for, and still is.

Do I think we could win? Well, it is easy to be cynical and say that it can't be done because Washington is set up to resist change, but I don't think we should scoff at the power of words, at their ability to inspire. I am posting on this board because I want to tell people 'yes we can'. http://www.youtube.com/watch?v=47MKGOPP4Zo&feature=chan...

[Statistical]

33. Good catch. n/t

[Better Believe It]

32. Unless Democrats decide to break phantom Republican "procedural" filibusters.

They only need 51 votes if the Democratic leadership decides to force "on-the-Senate-floor" Republican filibusters as they did in March of this year.

That filbuster ended in less than 24 hours.

[nashville_brook]

61. Time to find another compromise b/c this one ain't flying

[Liberal_Stalwart71]

36. I'm simply asking for an explanation. The question wasn't meant to solicit

smart-ass responses like this one. I'm merely trying to understand how these tax cuts work.

[hfojvt]

30. there are differences at different income levels

here is a comparison of rates http://journals.democraticunderground.com/hfojvt/103

Currently the standard deduction and personal exemption will cover the first $9,350 in income. There is also the making work pay credit of $400 per person and the child tax credit was bumped from $500 to $1000 as part of the Bush tax cuts. That last move, in my opinion, is a subsidy of families with children paid for by lower income single people who don't have children. So I would be happy to see it go away. A $500 per child credit/subsidy is enough, it doesn't need to be $1,000.

So at $10,000 in income taxes would got up by $32.5 plus $400.
However, under the Obama proposal they are still gonna go up by $200 (while an extra $2,000 - $4,000 in tax breaks is given to the wealthy - see here for details http://journals.democraticunderground.com/hfojvt/135)

At $15,000 in income, taxes would go up by $282.50 plus $400.
Ubder the Obamna plan, they still go up by $100.

$15,000 happens to be my income level and I currently use the Retirement Savings Contribution credit to knock my tax bill down to zero. However, that credit was part of the 2001 tax cuts and thus may also expire.

The bottom line, however, is the big picture. Just like George Bush claimed to be concerned about the poor when he proposed this tax giveaway to the rich, there is no reason to extend it by claiming convern to the poor. If you really care about the poor you do not give them $232.50 while you are giving the rich millions PLUS another $4,000. As for the poor, if we lived without that $232.50 in 2000, then we can live without it now.

[Liberal_Stalwart71]

37. Got it! Thanks for this wealth of information. I do understand now and appreciate

you not jabbing me for asking.

[Travis_0004]

20. So block the bil, and let their taxes go up even more.

[Hello_Kitty]

43. Or you could call your members of Congress and press them to amend this.

There is always that option.

[Bandit]

24. The NEW Democratic Core Principle... Regressive Taxation

:crazy:

[Individualist]

28. Take from the poor and give to the rich

:mad:

[dionysus]

29. he's evil!11!1! he must be defeated at all costs!!1!1

:eyes:

[Hello_Kitty]

41. You know, you could do something useful. Like call your members of Congress.

And ask them to address this problem with the compromise. This is easily fixed with an amendment. I find it appalling that so many people are so "meh" about increasing poor people's taxes while everyone else gets a cut. It's mean, unfair, and anti-stimulative.

[Name removed]

40. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Hello_Kitty]

42. It's also taking away a big chunk of refund check. Not smart.

Generally speaking refunds aren't more stimulative than more money in your paycheck but it's different for low income people. Believe me, that refund check is a big deal when you're poor. A lot of low wage people don't claim dependents on their W-4s so they can get bigger refunds. It's sort of a forced savings plan. Granted, a shitty negative interest one, but still.

So next year fewer poor people will be able to make the major purchase they were planning to with their refund check.

[Better Believe It]

45. The gifts to working class people just keep coming.

[joe_sixpack]

46. How does the earned income credit ( EIC) factor into this?

n/t

[Statistical]

51. There is no change in EIC so EIC will neither raise nor lower taxes owed in 2011 relative to 2010.

One thing that "could" be done is to amend the bill to boost EIC table by roughly $100 to $200 depending on income thus providing an offset for those who would "lose" under 2% plan.

They would get less under 2% plan but receive an equivalent amount via higher EIC.

Take someone making say $15K. Under 2% plan they get $300 but currently get $400 via making work pay credit. If an ammendment of EIC was made part of the bill boosting EIC payment for someone making $15K by $100 then net-net they would come out "even".

[Better Believe It]

58. That could be done but it won't be done.

[bobbolink]

52. It will also cause CUTS in programs for those who CAN'T WORK.

But that never seems to matter.

It is only "the working poor" who matter.

[mmonk]

53. Let them eat cake. The rich must be fed.

[Hello_Kitty]

54. Goolsbee evaded the issue when Dylan Ratigan brought it up today.

Sidestepped it by claiming most people were getting their taxes cut and the poorest would do worse with the tax cuts expiring. The WH response to this has been just as shitty. They're basically denying it.

[amborin]

56. K&R just reprehensible ( and sorry....didn't see your OP)

hmmmmm.....i rec'cd this, yet it stayed the same count....

[NoPasaran]

57. Maybe next time around they'll VOTE

Probably not.

[StarsInHerHair]

59. more bad news

nt

[Better Believe It]

60. Payroll Tax Cut Would Mean Higher Tax Rates for the Working Poor

Payroll Tax Cut Would Mean Higher Tax Rates for the Working Poor
By: David Dayen
December 10, 2010

The President predicted that his tax plan would pass Congress, saying specifically that “nobody — Democrat or Republican — wants to see people’s paychecks smaller on Jan. 1 because Congress didn’t act.”

But if Congress does act, people’s paychecks will get smaller – a substantial amount, actually. And it will be a particular subset of people – the working poor, people who make under $20,000 a year, or families under $40,000.

The issue concerns the difference between the Making Work Pay tax credit, which was a flat rate of $400 per worker, and the payroll tax cut of 2%. Because of this, people who make less than $20,000 will get less than $400, and will see their tax bill rise.

“I think it’s an unintended consequence,” said a charitable Michael Linden of the Center for American Progress. “But that will have the effect of raising taxes on people making less than $20,000.” Linden says that there are advantages to the payroll tax cut. For one, it’s bigger – twice the size of Making Work Pay on an annual basis. “If what we should worry about is job creation, a bigger stimulus is better,” said Linden. “But on a micro level, I’m disappointed families will have to pay more.

Read the full article at:

http://news.firedoglake.com/2010/12/10/payroll-tax-cut-would-mean-higher-tax-rates-for-the-working-poor/