Will there be another 2011 tax hike? While many are baulking at the $700 billion over 10 years to renew the 2001 tax cuts for families who make over $250,000, and no decision has been made on these tax cuts for everyone else in America, there is another tax break that is set to expire in January that remains highly unpublicized. We have talked extensively about the expiration of the 2001 or Bush tax cuts, but no one is talking about the expiration of the 2009 or Obama tax cut. Obama’s $60 billion a year Making Work Pay Credit will also sunset on January 1st unless it is extended.
The Making Work Pay Credit, a boone for most middle class families and a filing nightmare for some Social Security recipients, military retirees, and multi-income families, is set to expire after this year if it is not extended. This cut, introduced in the middle of 2009, was designed to reduce withholding rates and let middle class families take home an average $30 a month extra to stimulate the economy. As Blake Ellis with CNNMoney.com points out, this cut was designed to be a “stimulus” measure, and right now stimulus is a four letter word in Washington.
The cost to middle class families of letting this cut expire will be about $800 a year, $400 for individuals. While that is about half of what some middle class families will lose if the Bush tax cuts expire, it is still a nice chunk of change.
So, will the Making Work Pay Credit be renewed? Possibly, along with the 2010 AMT fix and restoration of deductions for teaching supplies, tuition and fees, etc. But if you have been paying attention to Congress, you know that even those fixes aren’t a certainty. While these tax hikes across the board are looming on the horizon, Congress is too busy with the same social issues they failed to pass before the elections to pay attention.
Of course, they also haven’t passed an operational budget to keep the government running after January 1. I suppose that could be good news. Maybe the tax cuts won’t be the only thing going away next year.