Making Work Pay credit expiring | Most paychecks will shrink

Capitol Hill

The Making Work Pay tax credit is not receiving much attention on Capitol Hill. Image: Flickr / willpalmer / CC-BY

After two years in effect, the Making Work Pay tax credit is due to expire. Unless Congress takes action, most middle-class taxpayers will see a reduction in their paychecks. The Making Work Pay tax credit will likely expire amongst debate over the Bush tax cuts.

The effect of Making Work Pay

The American Recovery and Reinvestment Act of 2009 included the Making Work Pay tax credit. This credit cut payroll taxes, adding about $33 a month to the average single person’s paycheck. This credit takes full effect for anyone making $75,000 or less, with partial credit for those earning more. About 90 percent of U.S. workers received some benefit from the Making Work Pay credit.

The expiration of the Making Work Pay credit

The Making Work Pay credit was designed to expire at the end of 2010. This credit was capped at $400 for anyone filing as a single person and $800 for joint filers. The money came in a slight increase in paychecks, rather than a one-time increase in tax returns. When the tax credit expires, deductions out of paychecks will increase, making a no fax payday loan tougher to get for some workers. There are currently two proposals to extend the Making Work Pay credit in the works, but none have been presented.

The tax cut debate

The debate over extending the Making Work Pay credit is not very loud. During the lame-duck Congress, the Bush tax cuts are most likely to be the center of the discussion. The major debate in Congress will likely be tax cuts for the 5 to 6 percent of Americans making $250,000 per year or more. If the Making Work Pay tax cut is extended, it will cost about $60 billion per year. Critics claim that the incremental nature of Making Work Pay reduces its impact. Proponents say that the extra $33 a month can have a huge impact for low-income families. How about you? Did you notice the Making work Pay credit in your paycheck?


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