Last week, President Obama delivered his State of the Union to Congress and the American public. He covered dozens of controversial issues, including the repeal of Don’t Ask, Don’t Tell and the recent Supreme Court ruling on campaign finance laws. However, the main focus of his speech was jobs, the economy, and taxes. For my readers who might have missed the live coverage, I have broken down all of the tax proposals Obama outlined during his 70-minute speech and examined the facts behind each one.
Cut Taxes for 95% of Working Families
Towards the beginning of his State of the Union address, the President bragged that his administration made a wealth of tax cuts. “We cut taxes for 95 percent of working families. We cut taxes for small businesses. We cut taxes for first-time homebuyers. We cut taxes for parents trying to care for their children. We cut taxes for 8 million Americans paying for college… we haven’t raised income taxes by a single dime on a single person. Not a single dime.”
For those of you who watched the speech live, you will remember that Obama joked that he was hoping to get applause from more conservative representatives for this statement. However, the lack of applause might be due to the misleading nature of his declaration. Although he has not directly raised taxes on these working families, the health care reform bill his party supports contains dozens of projected tax increases and fees on millions of taxpayers.
Business Tax Break Extension
Small business tax incentives and the middle class were common themes in the President’s speech. One of the largest cut’s Obama mentioned during his speech was his plan to extend a set of tax breaks that will allow businesses to write off investments in equipment (such as tractors, wind turbines, solar panels, and computers) more quickly. The 50% bonus depreciation tax break would total $38 billion in savings in the 2010 alone, which would represent an estimated 13% of all corporate tax receipts expected this year.
Elimination of Capital Gains Taxes on Small Business Investment
“While we’re at it, let’s also eliminate all capital gains taxes on small business investment,” Obama explained. This is a pretty drastic change from his campaign promise of doubling capital gains taxes, but the majority of economists support his proposal.
$30 Billion for Community Banks
Another part of the President’s plan to help small business owners is to increase the amount of credit available to them. “I’m proposing that we take $30 billion of the money Wall Street banks have repaid and use it to help community banks give small businesses the credit they need to stay afloat.”
Incentives to Stay in the USA
While discussing clean energy job creation, Obama also explained his intention to encourage “businesses to stay within our borders.” “It is time to finally slash the tax breaks for companies that ship our jobs overseas,” continued Obama, “and give those tax breaks to companies that create jobs right here in the United States of America.”
Middle-Class Tax Cuts
The President asserted that his administration would extend middle-class tax cuts, but in a cleverly worded sentence said they would “not continue tax cuts for oil companies, investment fund managers, and those making over $250,000 a year.” This is an obvious reference of his intention to let the Bush tax cuts expire, which would essentially raise taxes on couples making over a quarter of a million dollars per year.
Wall Street and Bank Fees
“To recover the rest {of the TARP funds}, I’ve proposed a fee on the biggest banks. Now, I know Wall Street isn’t keen on this idea. But if these firms can afford to hand out big bonuses again, they can afford a modest fee to pay back the taxpayers who rescued them in their time of need.”
The idea of collecting funds from financial institutions that cost the Federal government billions of dollars through massive bailouts is very popular among taxpayers. However, the fee that Obama mentions is actually a tax. He cleverly used the word “fee” to ensure support, as most Americans hate the word “tax”.
Federal Support for College Students
A key point of Obama’s State of the Union was his administrations support for education. He promised to give families a $10,000 tax credit for college, and suggest a number of changes to federal college funding such as limiting the required payments to only 10% of a graduate’s income, forgiving all debt after 20 years for graduates working for private businesses, or 10 years for those who choose a career in public service.
