This Congress and President Obama are responsible for putting in place the fastest – and one of the most widely shared – tax cuts in American history: the Making Work Pay Tax Cut in the Recovery Act. Americans are seeing that tax cut in every paycheck. The budget we put in place also includes $1.7 trillion in tax cuts for middle income Americans.
They are part of an impressive tax cut record –and Americans need to know the record. America is starting to move in a New Direction—beyond a narrowly focused prosperity for a few and toward more broadly shared economic opportunity for all.
American Recovery and Reinvestment Act
Tax Cuts for American Families ($232 billion over 10 years):
Making Work Pay Tax Cut: Provides immediate and sustained tax relief to about 95 percent of American workers and their families through the Making Work Pay tax credit, a refundable tax credit of up to $400 per worker ($800 per couple filing jointly), phasing out completely at $190,000 for couples filing jointly and $95,000 for single filers.
The credit provides over 110 million working families—about 95%—the tax relief they need right now and is being distributed largely by reducing tax withholding from workers’ paychecks beginning April 1st.
By April 1st, most workers began seeing an increase in their take-home pay. Families should see at least a $65 per month increase in their take-home pay.
As President Obama pointed out “Never before in our history has a tax cut taken effect faster or gone to so many hardworking Americans.” 2/21/09
A map providing the number of households that will receive the Making Work Pay tax credit and the total amount of tax relief the residents of the state will receive can be found at: http://www.recovery.gov/?q=node/307
Child Tax Credit: Cuts taxes for the families of more than 16 million children through an expansion of the child tax credit. This would provide a new tax cut for more than 6 million children, and increase the existing credit for more than 10 million children.
Earned Income Tax Credit: Expands the Earned Income Tax Credit by providing tax relief to families with three or more children and increasing marriage penalty relief.
American Opportunity College Tax Credit: Helps more than 4 million additional students attend college with a new, $2,500 tax credit for families, which is partially refundable. As a result, the nearly one-fifth of high school seniors who currently receive no tax credit will receive a tax cut to make college affordable for the first time. These tax credits phase out completely at $90,000 for individuals and $180,000 for couples filing jointly.
Alternative Minimum Tax relief: Protects 26 million middle-class families from being hit by the alternative minimum tax.
First-Time Homebuyers: Strengthens the housing market by enhancing the current first-time homebuyer tax credit by increasing it to $8,000 (up from $7,500) and by removing the repayment requirement. Some have credited this tax credit with bringing greater stability to the housing market.
Incentives to Buy New Cars: Provides a tax deduction for state and local sales taxes and excise taxes paid on the purchase of new cars, including light trucks and motor homes.
Business Tax Incentives to Create Jobs ($10 billion over 10 years):
Bonus Depreciation: Helps businesses quickly recover costs of new capital investments by extending the increased bonus depreciation for businesses making investments in new plants and equipment in 2009.
Small Business Expensing: Spurs small business investment by extending small business expensing, doubling the amount small businesses can immediately write off their taxes for capital investments and purchases of new equipment made in 2009 ($125,000 to $250,000). This write-off phases out completely for investments over $800,000 (up from $500,000).
Buying Back Debt: Provides assistance to companies looking to reduce their debt burdens by delaying the tax on businesses that have discharged indebtedness, which will help these companies strengthen their balance sheets so they can invest in job creation.
Small Business Loss Carrybacks: Increases cash flow for small businesses by providing a 5-year carryback of net operating losses (NOLs). This would allow many small businesses to write off losses incurred in 2008 against taxes assessed over the previous 5 years (current law limits NOL carryback to the previous 2 years), thereby reducing their taxes this spring.
Small Business Investment: Spurs investments in small businesses by cutting the capital gains tax on investors in small businesses who buy stock (in the next two years) and hold it for more than 5 years.
Jobs for Recently Discharged Unemployed Veterans and Disconnected Youth: Creates jobs with business tax credits for hiring recently discharged unemployed veterans who have been out of work or youth who have been out of school for 6 months prior to hire.
Renewable Energy and Energy Efficiency Tax Incentives to Spur Energy Savings and Create Jobs ($20 billion over 10 years):
Tax Credit for Renewable Energy: Extends for three years the production tax credit (PTC) for electricity derived from wind (through 2012) and for electricity derived from biomass, geothermal, hydropower, landfill gas, and waste-to-energy facilities (through 2013).
Easing Credit Crunch for Renewable Energy: Provides grants of up to 30% of the cost of building a new renewable energy facility in 2009 and 2010 in lieu of current law tax credits, or permits facilities to claim a 30% investment tax credit instead of a production tax credit, to address current the credit crunch for investments in renewable energy.
Energy Efficient Home Tax Credits: Promotes energy efficient investments in homes by extending and expanding tax credits through 2010 for investments such as new furnaces, energy-efficient windows and doors, or insulation. Increases the credit from 10 percent to 30 percent of the cost of the investment and raises the credit cap from $500 to $1,500, saving American families money on their energy bills.
Plug-in Hybrid Tax Credit: Spurs the next generation of cars by providing a tax credit of up to $7,500 for families who purchase plug-in hybrid and all-electric vehicles.
Tax Incentives for State and Local Job Creation ($26 billion over 10 years) for critical activities like school construction, low-income housing, and infrastructure development – particularly in area hardest hit by the recession.
The Congressional Budget: An Economic Blueprint
The Congressional Budget Resolution generally follows the President’s budget blueprint:
Cuts taxes for middle income families by more than $1.7 trillion over ten years, with an extension of the 2001 and 2003 income tax cuts (10 percent rate, marriage penalty relief and the child tax credit) for those taxpayers making under $250,000 each year.
Protects millions of middle-class families who would otherwise be hit by the alternative minimum tax in 2010.
Provides tax relief for small businesses.
Creates new incentives for retirement savings.
Extends estate tax relief to ensure that more than 99.7 percent of estates never pay a dime of estate taxes.
Extends all current business tax incentives until 2011, including the Research & Experimentation Tax Credit.
The budget also accommodates the following proposals in the President’s budget, consistent with the pay-as-you-go principle:
Expanding the Child Tax Credit helping millions of families with children.
Making the $2,500 American Opportunity Tax Credit permanent to make college more affordable. This is a new tax cut President Obama promised in his campaign.
Expanding the Earned Income Tax Credit by providing tax relief to families with three or more children and increasing marriage penalty relief.
Additional small business tax relief.
Like the President's budget, the Congressional Budget Resolution will not:
Increase taxes for families making less than $250,000 a year.
