The White House
Office of the Press Secretary
For Immediate Release
December 07, 2010
FACT SHEET on the Framework Agreement on Middle Class Tax Cuts and Unemployment Insurance: A Win for Our Economy, Jobs, and Working Families
The framework agreement announced by the President secures vital tax relief and investments in our workers that will create jobs and accelerate economic growth. The plan has three key accomplishments:
Working families will not lose their tax cut.
A typical working family faced a tax increase of over $3,000 on January 1st. That’s avoided under this framework agreement, and working families won’t see their tax cuts go away next year.
Focused on high impact job creation measures.
The framework agreement includes some of the best measures for jumpstarting growth and job creation, including a full year of emergency unemployment insurance benefits, an about $120 billion payroll tax cut for working families and a continuation of tax credits for working families. This is on top of growth generated by extension of the middle-class income tax rates.
Does not worsen the medium- and long-term deficit. These are responsible, temporary measures to support our economy that will not add costs by the middle of the decade. The President does not believe it is affordable to make the high-income tax cuts permanent and will continue to have that debate in the years ahead.
Overview of the Framework Agreement:
Extending the 2001/2003 Income-Tax Rates for Two Years
The framework agreement includes a mutually agreed upon solution to the impasse over taxes by extending the 2001/2003 income tax rates for two years and reforming the AMT to ensure that an additional 21 million households will not be hit with a tax increase. These measures will provide relief to more than 100 million middle-class families and prevent a tax increase of over $2,000 for the typical family.
Additional Provisions Designed to Promote Vigorous Economic Growth.
In addition to the 2001/2003 rates, the Administration secured several provisions that are vital for our economy’s growth, which would not have been possible without this framework agreement: $56 billion in unemployment insurance, an about $120 billion payroll tax cut for working families, about $40 billion in tax cuts for our hardest hit families and students; and 100% expensing for businesses next year.
1. GROWTH-ORIENTED PAYROLL TAX CUT FOR WORKERS:
The framework agreement reached by the administration includes an about 2%, employee-side payroll tax cut for over 155 million workers – providing tax relief of about $120 billion next year. This tax cut will have a major impact on jobs and growth – creating substantial numbers of jobs. It is widely recognized by economists across the political spectrum as a high bang for the buck way to boost growth and was cited by both major deficit reduction commissions as consistent with long term fiscal discipline.
A payroll tax cut has been endorsed by experts and commentators from across the political spectrum. Just last month, both the President’s Fiscal Commission and the Bipartisan Policy Center’s Debt Reduction Task Force described a payroll tax cut in 2011 as an effective way to spur growth and job creation. The tax cut legislation would provide for a transfer of General Revenues to the Social Security Trust Fund, ensuring no negative impact on Social Security solvency. And, as economist Nouriel Roubini wrote earlier this year, a payroll tax cut would spur growth because “for employees, the increased take-home pay would boost much-needed economic consumption and advance the still-crucial process of deleveraging households.”
2. HIGH IMPACT, JOB CREATING TAX CUTS FOR WORKING FAMILIES
Economic studies consistently find that lower-income households are the most likely to spend additional money, creating jobs and helping overall growth. That’s why the Congressional Budget Office, for instance, has concluded that “policies aimed at lower-income households tend to have greater stimulative effects.” The President fought to secure a two-year increase of the full Child Tax Credit and Earned Income Tax Credit. These provisions will, together, provide ongoing tax cuts to 12 million lower income families, with a total of 24 million children. In addition, the deal fully extends the American Opportunity Tax Credit for two years.
Lower-Income Working Families Benefited by Expansions in EITC and CTC
Families Children
Total 12.2 24.3
White 5.6 9.8
Hispanic 3.7 8.0
African American 2.2 4.7
Other 0.7 1.7
Illustrative Family: A working family with three children making $20,000 will continue to receive a tax cut of more than $2,000 as a result of the EITC and Child Tax Credit expansions in this framework agreement. The same family would receive an additional $400 tax cut from the new payroll tax cut.
Child Tax Credit:
The $1,000 child tax credit will be extended for two years with the $3,000 refundability threshold established in the Recovery Act. This extension will ensure an ongoing tax cut to 10.5 million lower income families with 18 million children.
Earned Income Tax Credit:
The Recovery Act included an expansion of the EITC worth, on average, $600 in additional assistance to families with 3 or more children. It also helped working married families by reducing the marriage penalty in the EITC. Continuing this tax cut for two years will benefit 6.5 million working parents with 15 million children.
American Opportunity Tax Credit:
The Recovery Act included a new, partially refundable tax credit of up to $2,500 to help students and their families cover the cost of college tuition. This deal fully extends AOTC for two years, ensuring that more than 8 million students will continue to receive this tax benefit to help them afford college.
3. UNEMPLOYMENT INSURANCE:
The framework agreement extended unemployment benefits at their current level for 13 months, through the end of 2011. This will save millions of Americans searching for work from losing their unemployment benefits in the coming months and will help create hundreds of thousands of jobs.
In December alone, 2 million workers who would have lost benefits will continue to receive them because of this framework agreement. Over the next year, 7 million workers will no longer need to worry that their unemployment benefits could be eliminated as they search for jobs.
According to the Council of Economic Advisers, passing this provision will create 600,000 jobs in 2011 alone.
4. BUSINESS TAX CUTS TO INCREASE INVESTMENT AND GROWTH:
In September, the President called for temporarily allowing businesses to expense all of their investments in 2011. This growth-oriented tax cut was included in the framework agreement.
According to the Treasury Department, complete expensing could generate more than $50 billion in additional investment in the U.S. in 2011.
The provision will provide a crucial incentive to 2 million businesses to invest and create jobs in the U.S and would be the largest temporary investment incentive in American history.
The framework agreement also includes a 2-year extension of the R&D tax credit and other tax incentives to support business expansion.
Gilbert comments: How will Progressive Democrats feel about this proposal?
Will extending the unemployment benefits be a deterrent to seeking jobs?
Let me prime the pump by providing a few one liners from names you might recognize:
Obama also spoke directly to concerns that he had ceded too much ground, comparing the tax debate to disappointment among liberals over the failure to include a so-called public option in the health-care overhaul
“This country was founded on compromise,” he said. [President Obama]
The surprise news conference came as liberals complained loudly about the agreement announced Monday night.
Sen. Bernard Sanders (I-Vt.) called the agreement “an absolute disaster and an insult to the vast majority of the American people,” and he said he would try to block it in the Senate. MSNBC host Ed Schultz called it “against the will of the American people.”
Adam Green, leader of a liberal activist group called the Progressive Campaign Change Committee, said, “President Obama let down millions of voters.” And Rep. John Conyers Jr., a senior House Democrat from Michigan, said he would “do everything in my power to make certain that legislation along these lines does not pass during the lame-duck session.”
“I have some serious reservations about parts of this deal,” Rep. Chris Van Hollen (D-Md.) said in an interview on Tuesday with Bloomberg Television. Van Hollen was the lead negotiator for House Democrats in bipartisan talks on the tax cut extension. “I understand the importance of getting to an understanding, but there are certain elements that I think will cause a great concern to members of our caucus.”
Source. Washington Post
I think those Democrat leaders you have quoted above should lead the way and cut a check to the US treasury for every cent of the tax increase they would have had to pay.
But all is not lost.
The gays, lesbians, etc who have / are married by the various state laws, now have to pay increased US taxes because they are married under state laws. (The tax increases are pretty substantial.)
Cook.This story is far from over. FOX has just reported the following:
Fox has learned that Reps. Peter DeFazio (D-OR), Jim McDermott (D-WA) and Jay Inslee (D-WA) are crafting a letter to share with the House Democratic Caucus that would try to prevent the Speaker from bringing the tax bill to the floor.
They hope to get 60 signatures on their letter (which is still being drafted) and then force a vote in the caucus. DeFazio says he thinks that if a majority of House Democrats are against this compromise, they shouldn’t bring it to the floor.
In other words, they are seeking a majority of the majority to move this and a senior House democratic source indicates they don’t know if they have a majority of democrats, saying they haven’t whipped this yet.
In an interview with Fox, DeFazio criticizes the president and says a majority of the House Democratic Caucus does not support the tax rate compromise. “There does not seem to be a majority of the Democrats who support the deal negotiated by Vice President Biden,” DeFazio said. “So we want to have a record vote in the caucus on a resolution that says this resolution should not go to the floor without a majority of Democratic votes.”
And meanwhile some powerful Republicans are also against it – DeMint, Michele Bachmann, the Club For Growth – from their point of view Republicans gave TOO MUCH up to Obama.
I’ll have my thoughts on this later, I’m churning out musical notes on a deadline for cash right now…….
Well in seems to me that both the democrats and the republicans will face the guillotine if the huge tax increase nail everyone next year.
Even the government people who have been taking pay cuts are facing substantial tax increases.
Just about the only thing needed to push the American taxpayer over the edge is Pelosi saying something like, “Let them eat cake”
“both the democrats and republicans will face the guillotine…”
I wish that could happen!
That never happens!
How COULD it happen in this two-party system?
Maybe you could say it already has, via our low turnout. But that’s always interpreted as the least pathetic party’s victory – e.g. the Republicans’ “great victory” last month due to despondent Dems staying home.
Vern. We at the Juice have done our part to get voters out of their easy chairs to place a first class stamp on an envelope 2 participate in this years election
The initial argument against the Bush Tax Cuts was that all the money went to the rich and everyone else got squat. Following that line, let them expire as obviously only the rich will get taxed and then let’s see who will vote against extending unemployment benefits – very few I bet.
Anway, it’s abiyt time to start paying for the wars and SS isn’t running a surplus so it’s not the time to cut the payroll tax – it ought to be increased. And businesses don’t make investments based on marginal changes in tax rates or hire because of tax rate changes – these are all gifts to those who contributed to the campaigns.