Create a tax credit of $500 for workers

Congress trims Obama's tax cut for workers

Updated: Tuesday, February 17th, 2009 | By Angie Drobnic Holan

One of the bigger pieces of the economic stimulus bill is the "Making Work Pay" tax credit, an initiative that Obama mentioned often during his campaign. If you ever heard Obama say he would give a tax cut to "95 percent of working families," this program is the origin of that claim.

Obama said the credit was intended to offset payroll taxes, which are automatically deducted from most workers' paychecks. Even if workers make so little that they do not owe income tax, the payroll taxes are not refundable. This is supposed to reimburse them for that. Under Obama's plan, the tax credit would be worth about $500 per worker, or $1,000 for working couples.

The initial version of the stimulus bill in the House, like Obama's original promise, was for $500 per worker. But that was reduced in the Senate to $400 per worker as a way of reducing the overall cost of the package. That lower level of $400 per worker, for a total cost of $116.2 billion, made it into the final bill. Obama signed the American Recovery and Reinvestment Act of 2009 on Feb. 17, 2009.

We should also note that the stimulus bill provides the tax cut only for 2009 and 2010. If Obama wants the tax cut to continue beyond those years, he will have to include it in future budget legislation. Indeed, it's possible Obama could raise the amount to $500 that way. But for the present, we find Obama tried to fulfill his promise and fell slightly short of the goal because Congress trimmed it to $400. That's what we call Compromise.

Sources:

Thomas, The American Recovery and Reinvestment Act of 2009 , accessed Feb. 17, 2009

PolitiFact.com, Tax cuts for 95 percent? A closer look , Oct. 20, 2008

Committee plan includes tax cut

Updated: Sunday, January 18th, 2009 | By Angie Drobnic Holan

Barack Obama is one step closer to achieving his promise of a $500 tax cut for workers.

The U.S. House of Representatives Ways and Means Committee released its plans for a major stimulus bill, and the tax cut is part of that.
 
"For 2009 and 2010, the bill would provide a refundable tax credit of up to $500 for working individuals and $1,000 for working families," said a summary released by the committee on Jan. 16, 2009. "This tax credit would be calculated at a rate of 6.2 percent of earned income, and would phase out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 for married couples filing jointly). Taxpayers can receive this benefit through a reduction in the amount of income tax that is withheld from their paychecks, or through claiming the credit on their tax returns."
 
We're keeping the status of this promise as In the Works.

Sources:

U.S. House of Representatives, Committee on Ways and Means, "The American Economic Recovery and Reinvestment Plan ,"  Jan. 16, 2009, accessed Jan. 18, 2009

Tax cut is included in economic recovery plan

Updated: Tuesday, January 13th, 2009 | By Angie Drobnic Holan

One of Barack Obama's oft-repeated promises was a middle-class tax cut. During the campaign, he proposed it as rebate on payroll taxes for most workers.

Obama's team has been working on a major economic proposal to jump-start the economy, and Obama has said a tax cut will be part of that.

"To get people spending again, 95 percent of working families will receive a $1,000 tax cut — the first stage of a middle-class tax cut that I promised during the campaign and will include in our next budget," Obama said in a speech at George Mason University.

We'll be watching to see if this proposal actually becomes law.

Sources:

Barack Obama transition Web site, speech at George Mason University , Jan. 8, 2009