Obama increases taxes on working poor while cutting taxes for the rich?

Did you know that Obama's deal with Republicans not only cuts taxes for the rich, but INCREASES taxes on the working poor?

More importantly, does your Congressman know? Will Brad Miller, G.K. Butterfield, or Mel Watt vote for this disgusting deal? David Price signed a letter opposing it, but what will he do when the vote actually comes?

Phone numbers for these Democrats are at the bottom of their web pages.

Contact Brad Miller here.
Contact G.K. Butterfield here.
Contact Mel Watt here.

The fix is already in for the US Senate to approve this travesty. Tell your Congressman that this deal should not be brought up for a vote. Just do nothing and the working poor will be better off than under this Obama-McConnell plan.

(It's hard for me to believe I had to type that -- Obama's plan will actually hurt the working poor).

If the Obama plan comes up for a vote, tell your Congressman to vote against it.

Remind the your Congressman that they've already sent many of these proposals over to the Senate. The Senate just needed to act on them.

At this point, doing nothing is better for the poor than passing this deal.


MWP credit expires automatically.

It appears that the analysis on which this post is based is incorrect. The Making Work Pay tax credit was temporary, applying only to calendar years 2009 and 2010. If no bill is passed during the lame duck session, it does not extend automatically to 2011.

See what I think is a neutral-source description of the MWP credit here: http://taxes.about.com/od/deductionscredits/a/making_work_pay.htm

As a result, it's factually incorrect to assert that the Obama/GOP deal increases taxes on the working poor. "Just do nothing and the working poor will be better off than under this Obama-McConnell plan" is mistaken, to the degree that the statement is based on the evaluation that the MWP credit is preferable to the payroll tax holiday which is included in the deal instead.

For a group of working poor taxpayers, and for the federal budget deficit problems overall, continuing the MWP credit would be a better deal. Unfortunately, that option is not available unless an additional half-dozen or so senators, including some Republicans, can be miraculously persuaded to change their voting positions.

Obama's plan does NOT raise taxes on the working poor compared to the default do-nothing alternative.

Dan Besse

So is it neutral on that dimension?

If it does not raise taxes, does it reduce them?


I've found myself objecting to the deal independently of this particular issue, partly for its certain worsening of the deficit, but more for the policy compromises that have given birth to it.

Reduces I think.

Without asserting that I'm absolutely positive--a tax expert I ain't--I think it reduces taxes on the working poor compared to the do-nothing alternative.

Certainly, that begs the question of whether the payroll tax holiday is good policy on other grounds. However, if I understand the consequences correctly, it does have the short-term effect of reducing what low-income earners pay in taxes during 2011, compared to what they will pay if no action is taken.

Dan Besse

I think that's correct, Dan.

It also sets the stage for a further hue and cry about Social Security deficits and the need to reframe who gets what when. A letter to the editor in today's Star-News wondered how Social Security could be in trouble since all those funds people had paid into it had been placed in an assumedly interest bearing trust.

This is the level of knowledge of most folks...zero. Those payroll taxes have been spent every year and replaced with an IOU. There is no Social Security Trust fund unless one wants to count a stack of worthless IOU's.

The party of greed is going to rape social security. Count on it. Congress will go along in the name of fiscal responsibility...a practice they forgot years ago and use only when it's supportive of a nay vote....which they would happily change if they themselves got something out of the deal. WP'sOS.

Stan Bozarth

Speaking of zero knowledge

This is where you give people too little credit.

Those payroll taxes have been spent every year and replaced with an IOU. There is no Social Security Trust fund unless one wants to count a stack of worthless IOU's.

Those IOUs are bonds -- which had never been defaulted on in this history of the republic.

I agree that the trust fund is a stack of bonds which can be redeemed or rolled into new bonds. And there's not a damn thing wrong with that.

If redeemed, then cut a few fighter jets/bombers in a given fiscal year.

If rolled over, then increase the taxes on the wealthy to what they were in the Clinton, or gasp!, Nixon era.

There's no problem if you're willing to cut spending OR increase revenue.

OR you could choose to default on the bonds the Chinese or the Saudis hold instead of the bonds that protect the poorest Americans.


I don't agree with this:

there's not a damn thing wrong with that.

That money was payroll-deducted for a specific reason, but it was used for other stuff. Other stuff that should have been paid for through normal revenue collections. Yes, we can (must) replace those funds, but this new revenue demand will be (already is being) blamed on SS, not the other stuff the money was spent on.

Thanks to that illogical approach, Social Security is considered more of a burden than it should be, endangering the very existence of this critical program.

p.s. I'm on the road until tomorrow evening, so if I don't respond it's not because I don't care. :)

The math is clear. The Obama plan hurts the working poor

Whether MWP was intended to be temporary or not -- weren't the Bush tax cuts temporary ? -- is immaterial.

Enacting this Obama-McConnell plan will increase taxes on the working poor.

From the linked article:

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.

Obama proposes to hurt the working poor and cut taxes on the rich.


Wrong: GOP intransigence is hurting the working poor.

I'm sorry, but your statement remains factually incorrect. The Obama/GOP deal does not increase taxes on the working poor compared to what they will pay if nothing is passed and all the tax provisions in effect now simply expire as scheduled.

The author's point in the article you cite is that the deal Obama has negotiated is not as positive for many working low-earners as an extension of the Making Work Pay would be. (I give that author the benefit of the doubt that he understands that the MWP credit automatically expires at the end of 2010. I think he understands that.) That point is correct. If Democrats in Congress have the votes to extend the MWP credit and let the tax cuts for the rich expire--which has been Obama's recommendation all along--then by all means they should.

What you and he are ignoring is the the fact of that automatic expiration of the MWP credit under existing law. If doing nothing would result in a more positive outcome for the working poor, then you'd have a damned good argument that Obama's deal hurts the working poor. Unfortunately, that's not the case.

Go ahead, make the argument against the whole package based on overall policy. But please stop accusing Obama of something which is not supported by the facts.

Dan Besse

Obama has joined the GOP to hurt the working poor

Obama's deal results in higher taxes for the working poor.

If this expired, if that expired, if, if, if...

If pigs flew out my fanny, then maybe tax law would make sense.

The fact remains:

Obama is increasing taxes on the working poor and cutting taxes on the rich.

There's no way around that.

Any Senator or House member voting for this should be primaried.


I have seen this reported in a number of MSN outlets

The Democrats main objection is the estate tax - if this is true then our elected officials are:

1) Stupid
2) Corrupt
3) Incompetent to such an extreme that is truly mindboggling

I can't decide - probably all three

I never meant to say that the Conservatives are generally stupid. I meant to say that stupid people are generally Conservative. I believe that is so obviously and universally admitted a principle...
John Stuart Mill 1866