Obama: GOP 'Holding Middle Class Tax Relief Hostage'

From ABCNews.com:

In his first press conference since May, President Obama talked about the economy and announced that he is appointing University of Chicago economist Austan Goolsbee to be chair of his Council of Economic Advisers, administration sources tell ABC News.

He took aim at the previous administration and the "partisan minority" that he says are blocking his economic proposals.

"Policies of the previous decades have left our economy weaker and our middle class struggling," the president said.

President Obama acknowledged that progress has been "painfully slow."

"Since I am the president and Democrats have control of the House and the Senate, it's understandable that people are saying, you know, what have you done?" President Obama said. "We've still got a long ways to go."

High-Income People Would Benefit From Extension of “Middle-Class” Tax Cuts

According to the Center on Budget and Policy Priorities, the media seems to ignoring a set of tax incentives for middle class Americans when discussing the expiration of the Bush tax cuts. In addition to helping taxpayers with average incomes, they would also provide tax breaks to taxpayers making over $200,000 per year.

This is because the 2001 tax law’s reductions in the lower tax brackets benefit not only people whose incomes fall within the lower brackets but also those whose incomes exceed those brackets. In fact, high-income people actually receive much larger benefits in dollar terms from the so-called “middle-class tax cuts” than middle-class people do.

Specifically, recent estimates from the Joint Committee on Taxation show that extending just the middle-class tax cuts would provide more than $6,300 in tax cuts to households with incomes above $200,000, on average, compared to $1,132 in tax cuts for households with incomes between $50,000 and $75,000. The Joint Tax Committee estimates show:

• Households with incomes exceeding $1 million will receive an average tax cut of $6,349 in 2011 if the middle-class tax cuts are extended while the high-income tax cuts are allowed to expire. (They will receive an average tax cut of nearly $104,000 if the high-income tax cuts are extended as well.)
• The story is similar, if not quite as dramatic, for households that make between $500,000 and $1 million. They will receive an average tax cut of $6,701 if the middle-class tax cuts are excluded (and of $17,467 if the high-income tax cuts are also extended).
• For all other income categories, by contrast, the size of the tax cuts are about the same whether the high-income tax cuts are extended or not. Even for households with incomes between $200,000 and $500,000, the effects are similar. The Joint Tax Committee figures show that they would receive an average tax cut of $6,743 if only the middle-class tax cuts are extended, and of $7,152 if the high-income tax cuts are extended, as well.

Continue reading at CBPP.org…

Permanent middle class tax cuts too costly

We are entering mid-term elections and thus everything is becoming a “political issue.” Not outside of the norm, tax cuts have become a primary focus. Tax cuts enacted under former President George W. Bush are scheduled to expire at the end of the year, affecting taxpayers at every income level. President Barack Obama proposes to permanently extend them for individuals making less than $200,000 a year and families making less than $250,000 — at a cost of about $2.5 trillion over the next decade.

Many Democrats want to extend them before the elections, so they can campaign on passing tax cuts for the middle class. But Republicans argue that many of the high earners who would face tax increases under Obama's plan are small business owners struggling to stay afloat in a tough economy.

House Majority Leader Steny Hoyer said Tuesday that tax increases will eventually be necessary to address the nation's mounting debt, and pull in revenue, raising a difficult election-year issue.

Hoyer raised the possibility that Congress will only temporarily extend middle-class tax cuts set to expire at the end of the year. He suggested that making them permanent would be too costly.

In the short term, government spending has been necessary to stimulate the economy, Hoyer said. But in the longer term, Congress will have to rein in spending and raise taxes to tackle the debt, he added.

"Raising revenue is part of the deficit solution, too," Hoyer said.

Senate Republican Leader Mitch McConnell said, "It's now official. Top Democrats on Capitol Hill are starting to signal their intention to raise taxes on the middle class."

Read the full Associated Press article here.

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2009 vs. 1999: Are you Better off?

Earlier this morning I came across an interesting article from MSN Money discussing how the financial situation of most middle class families has not improved over the past decade. When comparing the year 1999 – the peak of the dot-com boom – to the recession of 2008 and 2009 it is easy to understand why so many families feel their finances are worse off now than they were a decade ago.

"This hasn't been a sterling decade," says Isabel Sawhill of the Brookings Institution and the author of "Creating an Opportunity Society." She argues that the American dream of prosperity and advancement has turned into a myth. "The average American family hasn't been able to improve its financial situation."

Of course, it's impossible to compare 1999 with 2009 without noting that in 1999, the economy was still floating happily in a dot-com bubble, while this year we've been mired in the worst recession since the Great Depression.

But experts say these are just details. They argue that dozens of indicators -- after adjusting for 30% inflation since 1999 -- have been marching in the wrong direction for years, in ways big and small:

In 1999, 67% of workers had to pay part of their health care benefits cost, says the Bureau of Labor Statistics. In 2008, that had risen to 75%.

According to the Census Bureau, 10.3% of U.S. families lived under the poverty line in 2008, versus 9.3% in 1999.

Households in the bottom 10% made $12,181 or less in 2008, which was down 8.1% from 2000. But the threshold for household incomes in the top 5% was $180,000, down just 0.9% from 2000.

Continue reading at MSN Money.com…