Yesterday, the Washington Post, New York Times and other news sources ran stories about a new JCT "report" that was sent to Democratic congressional staff relating to the distribution of their proposal versus the Republican proposal (and current law) regarding the expiring "Bush" taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. cuts.
Washington Post blogger Ezra Klein popularized this chart that was in yesterday's Post that eventually received a lot of attention in the liberal webosphere. Klein's blog headline read "The Bush tax plan vs. the Obama tax plan in one chart."
Unfortunately, it is not technically Obama's tax plan. The plan was submitted by congressional staff Democrats and differs somewhat from the tax policies outlined in President Obama's budget. We looked at this plan after the Tax Foundation received calls concerning how this plan differs from the plan that is in the third column on the MyTaxBurden.org calculator, "Obama's Budget."
The Obama tax plan includes a one-year extension of the Making Work Pay credit, which this proposal sent to JCT does not. Furthermore, this plan sent to JCT does not include an extension of Pres. Obama's new education credits. Finally, it is does not include an additional tax on high-income taxpayers that would have limited the tax savings value of their itemized deductionItemized deductions allow individuals to subtract designated expenses from their taxable income and can be claimed in lieu of the standard deduction. Itemized deductions include those for state and local taxes, charitable contributions, and mortgage interest. An estimated 13.7 percent of filers itemized in 2019, most being high-income taxpayers. s.
JCT did score a proposal that would also extend parts of the tax provisions in the stimulus bill (EITC and additional child tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. expansion), but it appears that an extension of Making Work Pay isn't a top priority of congressional tax staff.
If the Making Work Pay credit is allowed to expire (as it probably should eventually), technically, Americans will see lower paychecks in January compared to December. Those paychecks will still be much bigger in January relative to a scenario of the tax cuts not being extended.Share