Making Work Pay?

Remember that much touted tax cut for all working Americans ("Making Work Pay") that the Obama Administration "gave" us last month. The one that Susan Roesgen was beating Chicago Tea Party attendees over the head with? Well here is one thing that Ms. Roesgen and the Obama Administration didn't disclose about that tax cut....that we would be TAXED ON IT.

Millions of Americans enjoying their small windfall from President Barack Obama's "Making Work Pay" tax credit are in for an unpleasant surprise next spring.

The government is going to want some of that money back.

The tax credit is supposed to provide up to $400 to individuals and $800 to married couples as part of the massive economic recovery package enacted in February. Most workers started receiving the credit through small increases in their paychecks in the past month.

But new tax withholding tables issued by the IRS could cause millions of taxpayers to get hundreds of dollars more than they are entitled to under the credit, money that will have to be repaid at tax time.

At-risk taxpayers include a broad swath of the public: married couples in which both spouses work; workers with more than one job; retirees who have federal income taxes withheld from their pension payments and Social Security recipients with jobs that provide taxable income.

Oh to be sure, the AP lays the blame for this at the door of the IRS, but anyone who has ever had to PAY taxes at the end of the year knows that ANY ADDITIONAL INCOME is going to be taxed! That is what our government does!

The article then goes on to explain some of the complexities in the tax code that the Administration did not take into account when they implimented this scheme.

The tax credit was designed to help boost the economy by getting more money to consumers in their regular paychecks. Employers were required to start using the new withholding tables by April 1.

The tables, however, don't take into account several common categories of taxpayers, experts said.

For example:

_A single worker with two jobs making $20,000 a year at each job will get a $400 boost in take-home pay at each of them, for a total of $800. That worker, however, is eligible for a maximum credit of $400, so the remaining $400 will have to be paid back at tax time — either through a smaller refund or a payment to the IRS.

The IRS recognized there could be a similar problem for married couples if both spouses work, so it adjusted the withholding tables. The fix, however, was imperfect.

• A married couple with a combined income of $50,000 is eligible for an $800 credit. However, if both spouses work and make more than $13,000, the new withholding tables give them each a $600 boost — for a total of $1,200.

There were 33 million married couples in 2008 in which both spouses worked. That's 55 percent of all married couples, according to the Census Bureau.

• A single college student with a part-time job making $10,000 would get a $400 boost in pay. However, if that student is claimed as a dependent on a parent's tax return, she doesn't qualify for the credit and would have to repay it when she files next year.

Some retirees face even bigger headaches.

Which is why across the board tax cuts work better. If you reduce the rate that each tax bracket has to pay by 1% or 2% you cover ALL of the contingencies without punishing the TAXPAYER for your mistakes!

It falls in line with the KISS theory - Keep It Simple Sir! If you keep it simple, it will work better for everyone - when you try to jury rig the results, you end up with complications like this.