For the past month, we've heard the same song and dance routine: The Bush-era tax cuts needed to be extended to help out the middle class and working poor. While most of the actual tax breaks go to the wealthiest Americans, this is the refrain most members of the GOP and a surprising number of Democrats rolled out again and again. Now that this "wonderful" tax package has passed both chambers and President Obama is expected to sign it post haste, CNN Money has provided a glimpse under the hood.
And just let me add that CNN Money should win no plaudits at all for this article. If they had chosen to publish it one, two or three weeks ago, it could have had an impact on both public opinion and the political debate. (It's not very likely, but it IS possible.) By waiting to publish it when the vote was a foregone conclusion served no one's interest. It's almost like CNN is sticking out their tongues at all of the workers who will be shafted in the coming year to say, "Ha Ha Ha! The joke's on you!"
Despite a tax cut compromise that is supposed to keep everyone whole financially, if not better off, 51 million households will face a higher tax bill or a lower refund compared with this year.So, for all the lofty rhetoric expended, it should now be crystal clear to you that most of our leaders who voted in favor of this nasty piece of legislation were doing nothing more than blowing smoke! A good chunk of the American workforce will end up making a down payment on the tax breaks for their wealthy counterparts.
The main culprit: The proposed payroll tax break would not be as generous for many low- and middle-income households as the tax cut it is replacing.
The bill, which has passed the Senate and is set for a House vote on Thursday, would for one year reduce workers' Social Security taxes. Workers pay 6.2% on their first $106,800 of wages. The tax cut deal would reduce that to 4.2%.
That payroll tax "holiday" would replace the Making Work Pay credit, which expires Dec. 31 and was part of the 2009 Recovery Act.
As a result, 51 million households -- about a third of the total -- would be out an average of $210 compared with this year, according to the nonpartisan Tax Policy Center.
"Nothing else in the compromise tax agreement compensates [them] for those losses," Tax Policy Center senior fellow Roberton Williams wrote in the blog Tax Vox.
About 45 million of the households represent private and public sector workers.
Here's why they won't get as much tax relief in 2011: Making Work Pay was worth $400 for individuals making $75,000 or less or $800 per couple making $150,000 or less.
To get that much under the payroll tax break, one would need to earn at least $20,000 ($40,000 for couples). That's because the payroll tax break would amount to 2% of a worker's pay.
The other 6 million households affected represent state and local government employees who received the Making Work Pay credit but won't qualify for the payroll tax holiday. Why? Because they're not covered by Social Security and therefore don't pay into the system...
And just let me add that CNN Money should win no plaudits at all for this article. If they had chosen to publish it one, two or three weeks ago, it could have had an impact on both public opinion and the political debate. (It's not very likely, but it IS possible.) By waiting to publish it when the vote was a foregone conclusion served no one's interest. It's almost like CNN is sticking out their tongues at all of the workers who will be shafted in the coming year to say, "Ha Ha Ha! The joke's on you!"
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