So with the making work pay credit expiring. . . . . .

[TheFarseer]

and the payroll tax reductions, isn't this almost a wash for working class people?

[Chalcedony]

1. Actually it's worse

the payroll tax reduction for those making les than $20K will not offset the loss of the making work pay credit.

That's why this wonderful bill will actually RAISE TAXES on the working poor.

[TwilightGardener]

4. Well, that's not true. Something NOT INCLUDED in the bill does not mean the bill

itself is raising anyone's taxes.

[pnwmom]

5. No, it won't raise the tax rate at all. But the end of the

Make America Work grant (which was always meant to be a one year stimulus only) means there won't be a special tax credit paid back to lower income taxpayers when taxes are filed.

[AlabamaLibrul]

9. Again, what difference does it make what the "tax rate" is

The rich have higher marginal income tax rates, but end up paying less thanks to tons of loopholes.

The poor's tax rate "won't be raised", but they'll pay more.

That's like saying the price of a car didn't go up after you added the spray crap to protect the carpets, detailing, new windshield wipers, and an upgraded stereo, because the MSRP for the base model is lower.

[TwilightGardener]

2. I don't know. What's the argument you're making?

[Skink]

3. What I don't get is?

in most years, as someone that makes under 20,000 per year, because my with holdings are at the max I get back about the Febuary rent payment. Last year however, according to turbo tax I was gonna get back about 150. which ain't bad. But then I figured in the making work pay credit and I did get the usual Febuary rent payment. So does that mean Bush somehow sunset whatever I was getting in those years of his administration a year before the current sunset provisions?

[Recovered Repug]

6. Make Work Pay also lowered your withholdings

so you got more with each paycheck. However, since you didn't pay as much in taxes your return wasn't as big (until MWP was included)

[Skink]

8. That was cool too so I took a loan from my 401k.

[Cerridwen]

7. It's not an apples to apples comparison.

It also depends on your annual taxable income.

The 2% FICA reduction will result in a 2% increase in earned income for those who earn income and who will now pay income taxes on that "additional" 2%. It may, in some cases be less of an increase in monies than the Making Work Pay credit which was factored in after taxable income was calculated.

For those earning the least, it may in fact result in a loss of monies.

The best way to check is to run the numbers on the 1040 and the schedule M.

[Statistical]

10. Not true.

income taxes are due on gross income. A change in payroll taxes changes your net income. Your gross income remains the same.


Example: You make $50K per year. Your gross income is $50K.
In a normal year you pay $3,200 in SS taxes however your gross income is still $50K. Your federal incomes taxes will have $50K on the wages line.
Next year you pay $2,200 in SS taxes (resulting in $1K more net income) however you gross income is still $50K.

[Cerridwen]

12. Beg your pardon? Taxable income is the income subject to taxes.

Not all income is equal. Some is earned; some is capital gains; some is inherited, etc. IRS code has some specific definitions of what income is which type and what rates apply to which.

Then you will have an "adjusted gross income" (line 38 on 2009 1040) which includes adjustments as allowed by IRS code, then you'll have exemptions and deductions depending on forms of income and/or expenses, and on and on until line 41 (2009 1040) which is the taxable income.

[Statistical]

13. Well not kidding but SS tax doesn't affect taxable income.

$50K income w/ 0% SS contribution rate, 4.2% contribution rate, or 6.4% contribution rate has exactly the same taxable income.

The same amount is reflected in "wages" line of W-2 and thus same amount is recorded on 1040.

[Skink]

11. That was the 90's. Don't remind me.