If Congress fails to act, income taxes will go up for millions of middle-class families when the new year begins.
The National Economic Council and Council of Economic Advisers estimates consumer spending would fall by $200 billion nationwide next year. Retailers from big chains to mom-and-pop small businesses would be affected—which is why even the CEOs of Walmart and Costco have called for a balanced approach that protects the middle class.
Asking millionaires and billionaires to pay their fair share is an essential component of the President's plan for balanced deficit reduction. The Senate already passed this bill, and the President is ready to sign it as soon as the House takes action.
Find out what's at stake in your state:
The Stakes for Middle-Class Families
If the GOP-controlled House fails to extend the middle-class tax cuts:
- 114 million middle-class families will see their federal income taxes go up.
- A typical median-income family of four (earning $75,000) could see its income taxes rise by $2,200.
- Families will receive a smaller Child Tax Credit, and 35 million low-and moderate-income working families with children will lose access to the Child Tax Credit altogether, costing them an average $1,000 a year.
- 11,000,000 middle-class families will no longer get help paying for college from the American Opportunity Tax Credit. Small businesses will be able to claim immediate tax deductions for only $25,000, rather than $250,000 of new investments.
The President's Plan
Under the President's plan, the 98 percent of families with incomes of less than $250,000 per year would continue to benefit in full from the income tax cuts that are set to expire at the end of 2012:
- Lower tax rates on up to $250,000 of income ($200,000 for single filers).
- The doubling of the Child Tax Credit to $1,000 per child and extension of the credit to working families that previously could not benefit from it.
- The American Opportunity Tax Credit, which provides as much as $10,000 of help over four years—the equivalent of a 30 percent discount on tuition at a typical state university—and thousands of dollars more help with college expenses than many families could have previously received.
- The 10 percent tax bracket, which will provide middle-class couples with a tax cut of up to $890 next year.
- Expansions to the Earned Income Tax Credit, which give millions of working families the break they need.
- Marriage penalty relief, which reduces or eliminates marriage penalties for nearly 38 million couples nationwide.
Under the President's plan, the income tax rates for high-income households would return to what they were under President Clinton, when the economy created nearly 23 million new jobs—including 633,900 new private-sector jobs —and we went from deficit to surplus, and businesses and investors did very well.