Senator Obama released his economic policy on Sunday and it was overlooked in the madness of the past week. His economic policy has provisions I feel are very important to the working, or "forgotten" class. I am talking about those people who work hard and either are barely getting by, or not getting by at all. These are the people I know, the people I grew up with and frankly, where my own family is right now.
Below I have listed a few of his ideas and how and why I feel they are important to us and why I feel Obama really "sees" us and understands our world.
These are his policies that I see as specifically addressing the working class people and why I like them.
Expand the Child and Dependent Care Tax Credit: The Child and Dependent Care Tax Credit provides too little relief to families that struggle to afford child care expenses. Currently the credit only covers up to 35 percent of the first $3,000 of child care expenses a family incurs for one child and the first $6,000 for a family with two or more children. And the credit is not refundable, which means that upper-income families disproportionately benefit while families who make under $50,000 a year receive less than a third of the tax credit. Barack Obama will reform the Child and Dependent Care Tax Credit by making it refundable and allowing low-income families to receive up to a 50 percent credit for their child care expenses. Coupled with Obama’s "Making Work Pay" tax credit, this proposal will help put more money directly in the pockets of hardworking low and middle-income parents.
This is the first example of how even good tax credits are sometimes skewed to those who are more well off than the folks are who are struggling to get by. Because the child care credit is not refundable, a family living on 15 or 20 dollars an hour earnings will not get the same tax credit for paying child care that a family living on 30 or more dollars an hour will. This is similar to the Social Security tax where those individuals making more than $97,500 a year pay less of a percentage of their wages in FICA taxes than do those making less.
Making the child care credit refundable will help lower income families in a couple of ways. It helps raise their standard of living a bit. And will also enable them to afford better daycare facilities which tend to cost more than lower quality daycare. This has an often unrecognized benefit of helping the children of lower income workers by allowing them to attend daycare and preschools that offer more educational opportunities.
Create a Universal Mortgage Credit: Owning a home is the culmination of the American dream for so many Americans. The tax code is supposed to encourage home ownership with a mortgage interest deduction, but it goes only to people who itemize their tax deductions. Like so much in our tax code, this tilts the scales toward the well-off. The current mortgage interest deduction excludes nearly two-thirds of Americans who do not itemize their taxes. Barack Obama will ensure that anyone with a mortgage, not just the well-off, can take advantage of this tax incentive for homeownership by creating a universal mortgage credit. This 10 percent credit will benefit an additional 10 million homeowners, the majority of whom earn less than $50,000 per year. Non-itemizers will be eligible for this refundable credit, which will provide the average recipient with approximately $500 per year in tax savings. This tax credit will also help homeowners deal with the uncertain state of the housing market today.
This one would affect my family. We purchased a house that we could afford, which translates to a lower cost, older home. Because of that we incur repair and upkeep expenses that owners of more expensive newer homes do not incur. But because our home itself is not terribly expensive, the interest we pay is not enough to make itemizing worthwhile for us because the standard deduction is more than the amount we could itemize. The 500 dollar tax credit for those home owners who cannot itemize would help with the expenses of keeping up an older home and very possibly prevent people from losing their houses or going into further debt to keep up their homes. This is another tax credit that will help families that work just as hard as or even harder than higher income families, but do not have the tax breaks the upper income families enjoy.
Expand the Earned Income Tax Credit: In the Illinois State Senate, Obama led the successful effort to create the $100 million Illinois Earned Income Tax Credit (EITC). As president, Obama will reward work by increasing the number of working parents eligible for EITC benefits, increasing the benefit available to parents who support their children through child support payments, increasing the benefit for families with three or more children and reducing the EITC marriage penalty which hurts low-income families. Under the Obama plan, full-time workers making minimum wage would get an EITC benefit up to $555, more than three times greater than the $175 benefit they get today. If the workers are responsibly supporting their children on child support, the Obama plan would give those workers a benefit of $1,110. The Obama plan would also increase the EITC benefit for those families that are most likely to be in poverty; families with three or more children.
I LOVE this provision! It is the first time I have seen the needs of the fathers addressed. And I may very well be wrong, but Obama is the only candidate I have heard that specifically addresses the needs of non-custodial fathers. It doesn't affect me personally, but the idea is great. The part I am really impressed with is the earned income tax credit for non-custodial parents paying child support. We always hear about irresponsible young fathers not supporting their children. But we do not often hear about the struggles of those same young fathers. They often make lower wages and paying child support often puts them in a position where they literally cannot survive economically. The lower income custodial parent (usually the mother) gets several types of assistance including educational assistance, child care assistance and the Earned Income Credit.(As they should) The non custodial parents, usually the fathers, are given none of these, but is expected to substantially contribute to the support of their children. I have never understood why unmarried fathers were not given the same kind of support as the mothers. By raising up the father, you will raise up the child. Responsible fathers paying child support should be rewarded and helped to get ahead. Instead they often feel that they are "punished" by having to pay child support which they cannot afford while nobody is trying to help them out. By giving fathers (or noncustodial parents) paying child support the earned income credit, we are helping them to get by, rewarding them for being responsible parents, and lowering the resentment level of the fathers who feel their needs are completely over looked.
Provide a "Making Work Pay" Tax Cut for America's Working Families: The American people work longer and harder than those in any other wealthy nation in the world. But their hours are getting longer and their wages aren't getting any higher. In addition they are being squeezed by rising health care, education and energy costs. Rather than relieving the burden on working families, the current administration has provided tax cut after tax cut to the wealthiest Americans and enacted tax breaks for the most well-connected corporations. Barack Obama will restore fairness to the tax code and provide 150 million workers the tax relief they deserve. Obama will create a new "Making Work Pay" tax credit of up to $500 per person, or $1,000 per working family. This refundable income tax credit will provide direct relief to American families who face the regressive payroll tax system. It will offset the payroll tax on the first $8,100 of their earnings while still preserving the important principle of a dedicated revenue source for Social Security. The "Making Work Pay" tax credit will completely eliminate income taxes for 10 million Americans. The tax credit will also provide relief to self-employed small business owners who struggle to pay both the employee and employer portion of the payroll tax. The "Making Work Pay" tax credit offsets some of this self-employment tax as well.
This part addresses the regressiveness of the Social Security portion of payroll taxes. I also want to point out something that I feel is not adequately addressed when it comes to raising the lid on Social security taxes. A whole lot of families making more than $97,500 a year believe that their payroll taxes will increase. What is often not being understood is that the payroll tax is based on an INDIVIDUAL's income, not the combined income of a family. So if you make $97,500 a year and your spouse also makes $97,500 a year, your Social Security portion of the payroll taxes will not increase at all.
With the tax credit, the regressiveness of the Social security tax is reduced and lower and middle income workers will benefit. In addition, the really small businesses, the sole proprietor businesses will have a better chance to hire a needed employee without being killed by the payroll tax. I know a couple of people in this position. One does medical coding and billing, one does daycare at home, and one is an upholsterer. They all have thought of hiring an employee either full or part-time, but when adding the Social Security tax into the mix, they cannot afford to pay a reasonable wage.
And coming from a lower socio-economic background, I can tell you that these small business owners will be offering these jobs to people they know, who are often people who are trying to find a way into the work world and would have a really hard time being hired by traditional employers.