Today, as tens of thousands of Coloradans file their returns, it’s a good time to remind ourselves that almost every one of us is benefiting from one of the biggest tax cuts in history.
Thanks to the Recovery Act, the law passed more than a year ago and signed by the President at a ceremony at the Denver Museum of Nature and Science, Coloradans and millions of people across America are paying less in taxes.
The Recovery Act is working well – really well – and not just in terms of road construction and other projects that make life better. The American Recovery and Reinvestment Act of 2009 kept us from falling into an economic depression and helped position us for a speedier recovery.
But unlike road projects with signs proclaiming where the money comes from, most of us don’t know the Recovery Act has reduced our taxes. It created $288 billion in tax benefits for 99 percent of taxpayers. But what does that mean for you?
The biggest tax benefit is a credit you might not know you’re receiving. The Making Work Pay tax credit is worth $400 for individuals with incomes of less than $70,000 and up to $800 for working families with incomes of less than $150,000.
For most people, the money didn’t come all at once in a refund. It showed up as lower federal tax withholding on their paychecks. In other words, the Making Work Pay tax credit has increased take-home pay for just about every worker in the United States.
Colorado families have used that money for a multitude of needs including buying food and clothing, paying medical bills and car expenses and putting some into savings. The money helped us all keep our heads above water.
In total, the credit adds up to $715 million in tax cuts for Colorado workers. These tax cuts were especially effective for the economy because they disproportionately benefited workers with lower and middle incomes – people who are the most likely to turn around and spend that money, putting it back into the economy.
That’s the kind of investment in consumer spending that has helped our economy begin the slow crawl back from the worst economic downturn since the Great Depression.
The Recovery Act also created economic benefits from credits like the first-time homebuyer’s credit and through increases in the Earned Income Tax Credit and the Child Tax Credit.
There are also the tax benefits that help people who lose their jobs maintain health insurance, tax incentives for small businesses, tax breaks for improvements to low-income housing programs, tax cuts for people who make their homes more energy efficient and much more.
Accountants working at sites around the state report that they are seeing dramatically bigger refunds on returns they are preparing for working families and individuals.
And it’s not just about refunds. Even if you’re not getting a refund you are most likely paying less tax due to the Recovery Act.
Despite all the rhetoric coming from some tea party groups complaining about higher taxes, nearly all these protesters are beneficiaries of tax cuts in the Recovery Act.
Colorado and the nation badly needed an economic boost in 2009, and economists broadly agree the Recovery Act has helped, at a minimum, soften the blow of recession. Last year, its direct spending investments kept us from falling into an economic depression and helped set us on a course for a brighter future. Today, the Recovery Act’s tax investments continue to put money into the pockets of everyday Coloradans, spurring economic activity and creating jobs.
Kathy White is director for the Colorado Fiscal Policy Institute, a project of the Colorado Center on Law and Policy. EDITOR’S NOTE: This is an online-only column and has not been edited.
