America's poorest may be hit hardest with tax plan

President Barack Obama gestures during a news conference at the White House in Washington, Tuesday, Dec., 7, 2010. (AP Photo/Pablo Martinez Monsivais)

December 8, 2010 7:08:40 PM PST
President Obama is being hammered by his own party for a compromise income tax proposal and despite all of the talk in Washington about extending the Bush tax cuts, your taxes may be going up next year.

Obama says Republicans were holding American's hostage over tax breaks for the wealthy and holding out wasn't worth it. So he's taking the high road.

"In this case the hostage was the American people and I was not willing to see them get harmed," he said.

But it appears some of the poorest working families in America will be harmed because Obama's make work pay tax credit is expiring this year and is not included in the current tax proposal.

"What is instead being offered is a 2.2 percent cut in social security tax paid by the employee," Golden Gate University's School of Tax and School of Accounting Dean Mary Canning said.

Caning says for a couple making a combined income of $30,000, the Social Security tax cut would amount to $600. But they are losing $800 a year from the make work pay tax credit that is expiring this year.

"So that household under this proposed plan would be $200 poorer," she said.

But a couple making $200,000 a year will get a tax break of $4,000 dollars from the Social Security tax reduction, but since they weren't affected by the make work pay tax credit, they don't lose anything from that.

Labor expert Harley Shaken says that is going to go down pretty hard.

"Politics is symbol as well as substance. The fact that so much is being given to those at the top one percent, and anyone in the bottom one percent is paying even $80 a year more won't resonate well amidst a very angry debate," he said.

Democratic leaders in congress aren't happy with the proposed deal. ABC7's Political Analyst Bruce Cain says Obama is working with Republicans to try and capture the political center, but it's a big risk.

"He could come out smelling like a rose if the tax cuts work and they really do stimulate the economy, and as you say if people get the perception that as you say he was the adult in the room. But at this point it's way too early to say that's the way it's going to come out," he said.

Obama points out, it's not over yet. But if the tax package passes the way it's worded now, he's going to have a lot of disgruntled people to deal with from his Democratic base.


Load Comments