The United States faces the most severe economic and financial crisis in generations. Tragically, much of the damage has fallen principally on Main Street. To help middle-class families get back on their feet and restore some fairness to the tax code, President Obama in February signed one of his signature issues into law – the Making Work Pay tax credit. As a result, families across the country are seeing more money in their paychecks. This is one of the fastest and broadest tax cuts in American history.
Today, the Obama Administration is releasing a state-by-state analysis to show the impact the Making Work Pay tax credit is having across the country.
In New Mexico that means 700,000 working families will collectively get $400 million in hand to help them weather the current economic storm. This reflects the Administration’s strong and sustained commitment to the middle class.
Nationally, the credit provides over 110 million working families—about 95%—the tax relief they need right now and will give nearly 60 billion dollars to America’s working families. The Republican alternative budget, announced today, would roll back these tax credits in 2010, thereby increasing taxes for the same 95 percent of working families.
IRS guidance asks that, by April 1, employers must have instituted the lower withholdings for their employees.
Restoring Fairness to the Tax Code and Providing Tax Relief to Working Americans. The Making Work Pay Tax Credit aims to help middle class families who are being squeezed by rising costs and stagnating wages.
For 2009 and 2010, the “Making Work Pay” tax credit provides a refundable tax credit of 6.2 percent of earned income up to $400 for working individuals and $800 for married taxpayers.
Families should see at least a $65 dollar per month increase in their take home pay.
The credit will phase out for taxpayers with adjusted gross income in excess of $150,000 for married couples filing jointly and $75,000 for other workers, and thus is fully phased out for taxpayers with modified adjusted gross income in excess of $190,000 for married workers and $95,000 for other workers.
Getting Needed Cash to Working Families. In an effort to get much needed cash to hard working Americans as quickly as possible, in late February the President announced the IRS would issue a new set of withholding tables http://www.irs.gov/pub/irs-pdf/n1036.pdf structured to get the tax credit to Americas’ workers in cash over the course of the year. By reducing required withholding amounts, workers’ take home pay is increased immediately.