White House Acknowledges Some Low Wage Earners Will Have Less Money In Their Pocket Next Year – Today’s Q’s for O’s WH

By Jared

Dec 8, 2010 4:07pm

National Economic Council director Larry Summers and White House senior adviser David Axelrod joined White House press secretary Robert Gibbs at today’s briefing.

As first noted by the New York Times, some low wage earners may be getting the fuzzy end of the lollipop in this tax cut compromise, in the sense that they may have less money in their pocket next year as opposed to this year. That’s because they receive tax credits through the Making Work Pay tax credit, which expires at the end of this year. That tax credit will be replaced by a payroll tax reduction of 2% — and for some low wage earners, the tax credit is bigger than 2% of their income.

TAPPER:  I was wondering if you could comment on the New York Times report today that those at the — at the lower end of the economic spectrum will actually be the only ones with less money in their pocket as a result of this deal because of the Making Work Pay elimination and the…

SUMMERS:  It's a good question.  It's a very — it's a very good question. You — you have to figure out what comparison you're going to do. It is true that for a $16,000 a year, so that's an all-year minimum wage worker, it is true that the Making Work Pay would have given that — would have given that worker $400, and the — this proposal, the pay roll tax holiday, will give $320.  That's — and there is that $80 difference.  On the other hand, the proposals, such as the House bill that contained the Making Work Pay, would not have — would not have included any of the three refundable tax credits that I mentioned, which, cumulatively, for that family, on average are worth several hundred dollars.

Obviously, it depends on how many kids the family has and what the situation is, but on average would work out to about $300 for such a family.  One. Two, would not have included the continuation of unemployment insurance benefits, which provide $300 a week in benefits.  And, three, takes no account of the extra growth increment that will come from this program.  If you raise GDP by 1 percent, that's $2,000 for the average family.

So we, as — as I've emphasized, this was a compromise.  But if you look cumulatively at the elements that were in this compromise, relative to no deal or even relative to the bill that passed through the House, that $16,000 a year family gets much more support from this bill than it would have — than it would have in its absence. And we believe you have to look at the totality of the program, not just take one provision from it and compare it with one provision in some other bill.

(CROSSTALK)

TAPPER:  But, just to be clear, there are those on the lower end of the economic chart who will be — who will not benefit in 2011 compared to 2010 in this deal, while everyone else on the financial spectrum will.

SUMMERS:  No.  No.  That's not right.  That's not right. But you just said — what you just said is factually — is — is wrong.

TAPPER:  A single person.  No family.  Doesn't get a child credit.  $16,000 a year.

SUMMERS:  Right.  That person will get $320.  That person will get — will — will get $320.

TAPPER:  As opposed to $400 this year.

SUMMERS:  Right.  So there's a person who, if they have — if they don't benefit from the unemployment insurance, if they don't benefit from the economic growth, if they don't benefit from the EITC or the child care or the American Opportunity Credit, might be $80 behind. There's a far larger number of families, however, who will be hundreds, if not thousands of dollars ahead, because of the refundable tax credits, because of the unemployment insurance and because of the growth.

Jake Tapper

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