"Making Work Pay" Tax Credit Makes Sense to Revive

The Making Work Pay Credit, a tax credit of $400 (or $800 for married couples) that was in effect in 2009 and 2010, is better targeted towards low- and middle-income families than the payroll tax cut in effect today, at half the cost. It is dramatically more targeted to these families than the Bush tax cuts, at just over a sixth of the cost. Prominent Washington figures and media outlets have suggested in recent days that either the payroll tax cut might be extended or the Making Work Pay Credit might be revived in order to help the economy, in addition to a full or partial extension of the Bush tax cuts. Tax cuts are not likely to be as effective in boosting economic growth and job creation as direct spending by the federal government. But if politicians nevertheless feel compelled to use tax cuts to help the economy, they should at least choose the tax cut most targeted towards the low- and middle-income families who need help — the Making Work Pay Credit.