Since his inauguration in January 2009, President Barack Obama has proposed a variety of tax relief bills to improve the financial security of America’s middle class.
During his first year in office, the President’s Making Work Pay Tax Credit reduced the taxes of 95 percent of working American families. This February, the President signed the Middle Class Tax Relief and Job Creation Act of 2012 into law, extending emergency jobless benefits and saving Americans millions of dollars in taxes. And, through the development of the American Opportunity Tax Credit, millions of families are now able to afford their children’s college tuitions.
“To build on [this] progress, President Obama has also proposed an extension of middle class tax cuts that would prevent the typical middle class family from facing a $2,200 tax increase next year,” said Alan Krueger, chairman of the Council of Economic Advisers.
Unless the tax cut extension is approved by the House of Representatives by December 31st, 114 million American families’ taxes will increase – by an average of $1,600 per year –
on January 1, 2013. Currently, 98 percent of the population earns $250,000 per year or less; the President’s tax extension will lower tax rates on the first $250,000 of income.
In addition to lowering annual taxes, the extension will ensure that 11 million families will continue to receive credit for their children’s college education funds, via the American Opportunity Tax Credit. The extension will also continue to provide Child Tax Credits to 35 million families, which will reduce their taxes by up to $1,000 per child. Furthermore, if couples decide to file their taxes jointly, they will not be penalized with higher taxation; the Obama administration projects the extension will affect 38 million couples.
“What we should do is give middle class families a guarantee that their taxes will not go up next year,” said President Obama. “When families have the security of knowing that their taxes won’t go up, they’re more likely to spend and grow the economy. And that benefits all of us.”
But, will the extension actually be passed? And, if not, what type of impact will higher taxes have on America’s economic recovery in 2013 – and beyond?