On tonight's The O'Reilly Factor, Karl Rove railed against one of the Obama administration's favored, and least known, policies -- the “Making Work Pay” tax credit. Rove derided the credit as “welfare” and “income redistribution.”
ROVE: Payroll tax holiday, this has a one year two percent payroll tax holiday, so two percent of your payroll that now goes into Social Security now will stay in your pocket. This was a compromise because what the administration wanted, about $144 billion of this is a tax cut and the rest of it is a disguised welfare payment. What the Democrats wanted, what Howard Dean wanted and what the President wanted, was to continue of what the administration calls “Making Work Pay,” which is sort of Orwellian because what it is, is it says if you're working, and you pay, you owe no income tax, the government will give you a welfare check each and every year. And that's what, that's what in the name of income redistribution they wanted. So they, they don't like this provision because while it is in essence, letting people keep some of their own money, what they really wanted was they wanted a pure straight-forward welfare that took from some, the middle class and the upper class, and gave to the poor and did so disguised through the income tax system.
What is the Making Work Pay (MWP) credit? According to the nonpartisan Tax Foundation, the credit is “the broadest tax-cutting measure in the 2009 stimulus bill....” The IRS says the provision provided “a refundable tax credit of up to $400 for individuals and up to $800 for married taxpayers filing joint returns.”
A refundable tax credit lowers the amount that a worker owes, dollar for dollar, in taxes. If a taxpayer owes less income tax than the value of their MWP credit, the difference is made up in the form of a check from the I.R.S. So if worker owes $200 in income tax and gets a $400 credit, the government will send her a check for $200. If a worker owes $500 and gets a $400 credit, her tax burden falls to $100.
So is Rove right when he says MWP is just a redistributionist welfare scheme? If so, he should probably also go back in time to 2001 and complain to his boss, President George W. Bush, who signed into law an expansion of the Earned Income Tax Credit, a refundable credit that works very similarly to MWP and can put more than $5,500 into a taxpayer's pocket. That credit was originally signed into law and and then expanded by Republican Presidents Ford, Reagan, and George H.W. Bush. George W. Bush also expanded the Child Tax Credit and made it more refundable. Both tax credits were passed as part of President Bush's 2001 tax cut package.
As for the claim that MWP is a transfer from middle and upper income people to the poor, the Tax Policy Center reported that “couples with income above $190,000 and others with income above $95,000 would not get the credit.” Beyond that, the TPC says that the “credit could induce some low-income people to work.” Maybe in Rove's world $95,000 is poor, but for rest of us I think it qualifies as upper middle class.
CNN.com has reported that the credit “helps out more than 75% of American households,” and if the provision is allowed to lapse - as would happen if the proposed tax deal becomes law -- “the 110 million families that received higher paychecks in 2009 and 2010 will be back where they started.” Does Rove think there are 110 million poor people in this country? If so, maybe that's something we should be talking about on prime time news.