OPPORTUNITY FOR ALL: MIDDLE CLASS TAX CUTS IN THE PRESIDENT’S FY 2015 BUDGET
Tuesday, March 4, 2014
The President’s FY2015 budget released tomorrow will show how to achieve real, lasting economic security and expand opportunity for all so that every American who is willing to work hard can get ahead. The President’s budget will show in real terms the choices we can make to expand economic opportunity and strengthen the middle class, like closing unfair tax loopholes so we can invest in the things we need to help the middle class and those striving to get into it, grow our economy, and provide economic opportunity for every American. It invests in infrastructure, job training, and preschool; cuts taxes for working Americans while closing tax loopholes enjoyed by the wealthy and well-connected; and reduces the deficit.
In the State of the Union, the President called for an expansion of one of those tax cuts for working Americans, the Earned Income Tax Credit (EITC). The President’s budget will lay out the details of this proposal, which would cut taxes for 13.5 million working Americans, while also proposing to expand tax cuts to help middle-class and working families afford child care, send their kids to college and retire with dignity. These pro-growth and pro-opportunity tax cuts would be fully offset by closing tax loopholes, including the so-called “Gingrich” and “Carried Interest” provisions that let high-income professionals avoid the income and payroll taxes other workers pay.
The White House also released a report on the economic benefits of expanding the EITC. To read the report, click HERE.
DETAILS - HOW THE PRESIDENT’S BUDGET CUTS TAXES FOR AMERICAN FAMILIES
The President’s highest priority is to ensure economic opportunity for all Americans. In his first term in office, he cut taxes by $3,600 for a typical middle-class family, and in 2012 he fought to keep taxes low for 98% of households while asking the wealthy to pay the same rates as in the 1990s. But the President believes there is much more to be done. This year’s Budget would:
? Strengthen the Earned Income Tax Credit (EITC) and Child Tax Credit: The EITC and refundable Child Tax Credit are among our most effective tools for reducing poverty and rewarding work. This year’s Budget proposes to:
o Significantly Strengthen the Childless Worker EITC: The President’s Budget significantly strengthens the childless worker EITC, benefiting 13.5 million workers. This expansion would address an important missed opportunity in the EITC – identified by economists of both parties – to provide support and an additional incentive to work to childless adults, while also making it available to younger workers who are currently excluded. This expansion – which would lift about half a million people above the poverty line – would be paid for by closing tax loopholes that let high-income professionals avoid the income and payroll taxes everyone else has to pay.
? Make Permanent Important Improvements the President Has Already Achieved: The Budget also makes permanent important EITC and Child Tax Credit improvements that help 16 million families with 30 million children, and have helped lift 1.4 million Americans out of poverty.
? Expand and Improve Tax Benefits that Help Middle-Class and Working Families:
? Pay for Child Care: Families with young children know how high the cost of childcare can be – and how it often keeps a parent from full-time work. The Budget proposes a significant expansion of the Child and Dependent Care Tax Credit, targeted to families with children under the age of 5. About 1.7 million families would benefit from this expansion in 2015, receiving an average tax cut of more than $600.
? Save for Retirement: Too many households know they should be saving for retirement but lack access to employer-sponsored plans like 401(k)s, which puts the onus on individuals to set up and invest in an Individual Retirement Account (IRA). Complementing the President’s myRA executive action, the Budget proposes to establish automatic IRAs (or auto-IRAs), which will expand access to and build on proven best-practices in the private sector to encourage workers to save. About 13 million workers would begin contributing to retirement savings through auto-IRAs as a result of this proposal.
? Pay for College: Education has never been a more important part of the path to opportunity and the middle class, and the President believes that we should do all we can to help students and their families afford college. That’s why this Budget would:
o Permanently Extend the American Opportunity Tax Credit (AOTC), which will benefit 11.5 million families and students by an average of more than $1,100.
o Simplify Taxes for Pell Grant Recipients, benefiting nearly all of the approximately 9 million Pell grant recipients by clarifying AOTC rules and simplifying calculations and providing some with a reduction in taxes or a boost to their AOTC.
o Provide tax relief to student loan borrowers by excluding student loan forgiveness from taxation for borrowers who have made student loan payments for many years under an income-related repayment plan.