Rep. Scott Murphy, D-N.Y, today is set to introduce a proposal that would renew for an extra year the “Making Work Pay” tax credit valued at up to $400 annually for working individuals; $800 for married taxpayers.

The initiative is the first bill from Murphy, since he was sworn into the House in April to represent New York’s 20th congressional district.

“What we’re seeing in this recession and what we see in the 20th district is that the middle class families are getting squeezed,” Murphy said. “People are working harder, and they’re still struggling to get by.”

Congress originally passed the refundable tax credit in February as part of the $787 billion economic stimulus package. But it is set to expire after 2010.

Murphy said that even if the U.S. economy improves over the next two years, the tax credit is important to give low- and middle-income workers “a little bit of relief.”

His bill would keep the tax credit in place until Dec. 31, 2011.

Wage earners generally see the tax credit in the form of bigger paychecks, because the IRS directs employers to reduce the amount of federal income taxes automatically withheld each pay period. For more than 110 million households, the IRS estimates, the difference is an additional $65 or more each month.

Self-employed taxpayers also can claim the credit on their 2009 tax return.

The credit — equal to 6.2 percent of earned income — phases out for taxpayers whose modified adjusted gross incomes exceed $75,000 or married couples filing jointly with a modified adjusted gross income of $150,000. The price tag of the proposal isn’t known. But Murphy acknowledged it could be significant.

“This is a meaningful tax cut, and it’s not going to be free,” he said. But, he added, “it’s important to set our priorities,” and Congress should make it a priority to “provide some relief to our working families.”

When Congress passed the credit in February, supporters said its approach as a payroll deduction — rather than a single rebate check — could spur spending by consumers, who might otherwise be tempted to put a lump sum into savings or pay down debt.