Republicans and Obama Raised Taxes on Poor

It totally missed this item last December when the tax “compromise” between Obama and the Republicans in Congress was passed.  Since the Obama tax cuts from 2009 did not survive the compromise, only the Bush cuts for the upper brackets did, taxes were effectively raised on the poorest 51 million Americans.  Even though the payroll tax was cut by 2%, the removal of the “Making Work Pay Tax Credit” means lower income workers take home less money, pay more taxes, and get a weaker Social Security system. But, we could borrow enough to ensure continued tax cuts and breaks for those making more than $250,000. It’s Washington’s logic, not mine.  David Cay Johnston gives the full detail in his article :

Obama and the GOP: United Against the Working Poor

Who says bipartisanship is dead?

On Capitol Hill, the Democrats and Republicans may no longer play cards and drink together, but that does not seem to stop them from working together to shift tax burdens down the income ladder even when it violates their promises on the campaign trail.

Grover Norquist calls bipartisanship the political equivalent of date rape. But there is one group that President Obama, many congressional Democrats, and all congressional Republicans ganged up on in December — the working poor.

The tax compromise passed in December has been hailed everywhere as a payroll tax cut combined with an extension of the Bush tax cuts, despite the fact that it raised taxes on a third of Americans. The killing of Obama’s Making Work Pay tax credit, which the White House called the biggest middle-income tax cut ever, and the replacement of it with the Republicans’ payroll tax cut raised taxes on single workers whose wages come to $20,000 or less and married couples with less than $40,000 in wages.

That’s 51 million taxpayers, the Tax Policy Center estimated. (See Table T10-277.)

Among the poorest fifth of tax units, whose annual cash income is less than $17,878, two-thirds got hit with a tax increase. On average, their taxes went up $134, which is 1.3 percent of this group’s total cash income.

Consider a single worker who makes $6,000. That was the average wage of the bottom third of workers in 2009, the Medicare tax database shows. Killing the Making Work Pay credit in favor of the payroll tax cut amounted to a tax increase of $252, or 4 percent of total income.   more here…

 

 

How Economic Policy is Made by Congress (worse than sausage making)

From CalculatedRisk on 3/15/2010. Home Builders $2.3 Billion “Gift” from Taxpayers

Last year, included in the “Worker, Homeownership and Business Assistance Act of 2009” that extended the popular unemployment benefits were two unpopular and ineffective tax credits: the home buyer tax credit, and a net operating loss carryback extension to allow businesses to write off current losses against profits up to 5 years ago – the profitable years for home builders.

From Zach Fox at SNL Financial has an update on the carryback: Builders record $2.30B in tax benefits

Zach has much more on the home builders, and here are some comments from Chris Thornberg on the effectiveness of the tax credit:

…As Thornberg notes, the only reason for a tax provision like this is to spur construction – something we don’t need right now. It would be better if there was less capacity in the home building sector.

One thing is certain, the Return on Lobbying (ROL) for the home builders was awesome, as Gretchen Morgenson noted in the NY Times last year: Home Builders (You Heard That Right) Get a Gift

The Center for Responsive Politics reports that through Oct. 26 of this year, home builders paid $6 million to their lobbyists. … Much of this year’s lobbying expenditures were focused on arguing for the tax loss carry-forward, documents show.

Among individual companies, Lennar spent $240,000 lobbying while companies affiliated with Hovnanian Enterprises spent $222,000. Pulte Homes spent $210,000 this year.

That’s some return on investment. After spending its $210,000, Pulte will receive $450 million in refunds. And Hovnanian, after spending its $222,000, will get as much as $275 million.