WASHINGTON (AP) - President Barack Obama calls his tax and spending plan "middle-class economics," but most middle-income families would see little change in their tax bills.
WASHINGTON (AP) — President Barack Obama calls his tax and spending plan "middle-class economics," but most middle-income families would see little change in their tax bills.
Obama is proposing a total of $1.5 trillion in new taxes over the next decade, mostly on corporations and high-income households. He would use much of that money — nearly $280 billion — to pay for targeted tax breaks for low- and middle-income families.
Obama's proposed tax cuts would benefit households with two wage earners, families with young children in child care and those with older children in college. One proposal would automatically enroll workers in individual retirement accounts, unless they opt out. Another would extend the Earned Income Tax Credit to low-wage workers without children.
Middle-income families that don't fit these categories won't see many changes in their taxes, according to an analysis by the Tax Policy Center, a research group formed by the Urban Institute and the Brookings Institution.
For families making between $50,000 and $75,000 a year, about a quarter of them would get a tax cut, averaging $545, according to the analysis. About 6 percent would get a tax increase, and the rest — about 70 percent — would see no change in their tax bill.
Among the bottom 20 percent — families with incomes averaging $15,600 — nearly a third would get tax cuts averaging $617. The rest would see little or no change in their taxes.
"The key thing is that, overall, there will be winners, losers and a lot of people unaffected," said Roberton Williams, a fellow at the Tax Policy Center.
The center's analysis focused on the effects of the two-earner tax credit, the child-care credit, the expanded education credit, the tax credit for low-wage workers and the program making it easier for workers to enroll in retirement accounts, Williams said. The analysis also took into account Obama's proposal to increase taxes on some investments and estates.
All of these proposals were part of Obama's larger budget plan, which he unveiled Monday.
Obama would pay for middle-class tax cuts by raising taxes on the wealthy — including increasing the tax on capital gains — and changing the way the U.S. taxes the foreign profits of American corporations. Obama's proposals are designed to further talks on Capitol Hill about revamping American business taxes, lowering the overall tax rate while eliminating or reducing many tax breaks.
Obama's proposed tax increases, however, are running into strong opposition from Republicans in Congress.
"I want to work with this administration, and I hope that we can find common ground," said Rep. Paul Ryan, R-Wisc., chairman of the tax-writing House Ways and Means Committee. "But the president has to demonstrate that he's interested in governing, not just posturing."
Obama's proposed tax cuts are getting a friendlier welcome — House Speaker John Boehner, R-Ohio, said he is open to Obama's plan to increase a tax credit to help pay for childcare expenses. But Boehner has been critical of Obama's overall plan.
The Obama administration says its proposal addresses decades of rising income and wealth inequality, and a tax system that "lets the wealthy shelter hundreds of billions of dollars from taxes each year."
"The president's budget proposes targeted policies to strengthen the middle class, level the playing field for American businesses, create more fairness in our tax code, and lay the groundwork for long-term economic growth for our country that is broadly shared, all while setting a course to put our country on sound fiscal footing," Treasury Secretary Jacob Lew said in a statement.
Among Obama's proposed tax cuts for middle- and low-income families:
— Create a tax credit of up to $500 for families with a second wage-earner, which the administration says would benefit 24 million couples. Cost: $89 billion over 10 years.
— Triple the child care tax credit — to a maximum of $3,000 per child — and make the full credit available to families with incomes up to $120,000. Families with higher incomes could get a reduced credit. Cost: $50 billion over 10 years.
Obama's plan would repeal tax breaks for flexible spending accounts for child-care expenses.
— Extend the Earned Income Tax Credit to low-wage workers with no children. Cost: $60 billion over 10 years.
— Consolidate several education tax breaks into an enhanced tax credit of up to $2,500 a student to help pay for college expenses. The tax credit, which is scheduled to expire at the end of 2017, would be made permanent. Cost: $31 billion over 10 years.
Obama initially proposed to scale back the tax benefits of college savings accounts, known as 529 accounts. But he dropped the proposal after getting resistance from both Republicans and Democrats in Congress.
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