- I did not realize my checks were larger. I get direct deposit, and do not pay attention to small changes in the amounts, especially because they frequently change for other reasons. Therefore, this had no stimulative effect on me.
- The overall tax rate didn't change - the credit is merely temporary, and it is very nice, but why not permanently lower the rates? See Permanent Income Hypothesis.
21 February 2010
Making Work Pay Tax Credit
I paid my taxes this morning and realized that I owe $146. Past years have been more painful but this year, what hurt more is my expectation that I had a refund coming. Apparently, the Making Work Pay tax credit lowered withholding levels, but did not change tax rates. The $400 credit therefore makes the lowered withholding amount coincide with the unchanging tax rates. I have two problems with the credit: