NEW YORK (CNNMoney.com) — Are you ready to give up $30 a month?
That’s what may come out of your paycheck if — as expected — the Making Work Pay tax credit expires at the end of the year.
The credit was enacted last year as part of the Recovery Act to put more cash in people’s pockets. For the past two years, it has boosted paychecks by up to $400 for single filers and $800 for joint filers by reducing the tax withheld and giving a credit for that amount. That’s $33 or $67 a month
Taxpayers who make $75,000 or less are eligible for the full credit, while higher earners can receive partial credit. More than 90% of working Americans have been helped by the tax break.
Now they will feel the pain when the credit goes away.
A Senate Finance Committee aide said panel chairman Max Baucus, a Montana Democrat, is working on a proposal to extend a number of expiring tax breaks when Congress returns next week.
Obama proposed an extension months ago, but it’s unclear if the administration will fight for it now.
Tax cut stew for Christmas
And with only weeks remaining in the lame-duck Congress, the credit is likely on its way out, said Clint Stretch, managing principal of tax policy at Deloitte Tax.
“I haven’t seen any serious effort to extend Making Work Pay,” Stretch said. “For this to get passed, somebody in Congress would have to be saying this is a priority, and we just haven’t seen that happening.”
Instead, most of the buzz is about the Bush tax cuts, which are also slated to expire at the end of the year.
Republicans are fighting to extend the Bush cuts for everyone — including higher income Americans. But Obama, who has promised not to raise taxes on the middle class, is pushing to preserve the cuts only for family income up to $250,000.
“The most curious aspect of the tax debate is the obsession with taxes at the high end,” said Chuck Marr, director of federal tax policy at the left-leaning Center on Budget and Policy Priorities. “But when almost every middle and lower class American is going to face higher taxes, nobody’s talking about it.”
The big issue with keeping Making Work Pay around is its cost — about $60 billion to extend it one year.
“Stimulus is a bad word now, so anything labeled stimulus will not get traction,” said Roberton Williams, a senior fellow at the Tax Policy Center.
But if the extension isn’t passed, the 110 million families that received higher paychecks in 2009 and 2010 will owe more taxes than they did during those two years.
“Most people may have no idea they received it and no idea that it’s going away,” said Marr. “But what you can be certain of is that they’ll have less money and they’ll spend less — and this is a terrible time for the economy to lose $60 billion of spending.”