One of the central economic challenges that candidate and then President Obama identified was that, even before the recent economic crisis, middle class families had faced nearly a decade of stagnant wage growth, while the cost of things like paying our health care and for the education of our children have skyrocketed. Incomes have become more unequal. Tax burdens have been shared less equally.
The animating spirit of economic policy in President Obama's Administration has been a vision of America's future in which sustained economic growth, built by sound investment and skilled and productive workers, creates good jobs and rising incomes and spreads opportunity and economic security for all Americans. The President's focus on providing relief of the middle class has been at the heart of his agenda. It was a central element of the Recovery Act, in the jobs tax credits passed since then, and in health reform. Federal taxes have been reduced by $173 billion this year.
As a result of these policies, the average tax refund paid thus far has been about $3,000 per family, an increase of nearly 10 percent. That is largely due to the American Recovery and Reinvestment Act, signed into law last February. Through the Recovery Act, working families and small businesses are benefiting from more than $160 billion in tax relief. Take just one example: the Recovery Act's Making Work Pay tax credit provided a tax cut to 95 percent of working American families. Thanks to Making Work Pay, individuals are collecting $400 more through their paychecks, and married couples are collecting an additional $800.
In addition to Making Work Pay, as a result of the Recovery Act millions of Americans this year benefited from new tax credits including:
* Up to $2,500 for families to help cover rising college tuition expenses, a down payment on the education of the next generation of Americans;
* Up to $8,000 for first time home buyers to help new families purchase their first home and to help stabilize the housing market;
* Up to $1,500 for homeowners to make energy-efficiency improvements to their home; and
* Up to $600 for working single parents through an increase in the Earned Income Tax Credit
Providing tax cuts and refundable tax credits to American families puts more money in people's pockets and encourages them to spend. In an economy facing a substantial shortfall in aggregate demand, increased consumer spending can go a long way toward spurring growth, creating jobs, and promoting a sustainable recovery. The tax relief program that the President has promoted is critical for Americans working to make ends meet. It is also good for business. Last month, the President signed a jobs bill that will encourage businesses to create jobs and help put Americans back to work. It forgives payroll taxes for businesses that hire someone who has been out of work at least two months and it provides tax refunds to small businesses for investments in equipment. In that way, the tax relief the President has supported does more than ease the burdens on the middle class -- in these hard times, it also constitutes good macroeconomic policy.
Another crucial set of policies to provide tax relief to middle class families has been the health insurance reform bill recently signed into law by President Obama. Health reform includes the largest health care tax cut in history for middle class families. For the millions of American households benefiting from that relief, health insurance will become much more affordable. Many of those measures, crucially, help reduce the cost of hiring. They are important tools in encouraging businesses to create jobs, to expand, and to invest in their future. Small businesses, in particular, benefited through a tax credit covering up to 35 percent of health insurance premiums that small businesses pay to cover their workers this year and increasing to 50 percent in 2014.
In building a new foundation for economic growth, President Obama also recognizes that, for too long, irresponsible fiscal policies have placed our country in a serious fiscal situation. For this reason, he put forward a budget that brings back common sense, fiscally responsible principles. The budget includes a commitment to allow the Bush tax cuts to expire for those at the very highest income level, the top 2 percent of U.S. households, bringing rates back to the levels of the 1990s - a period of strong, consistent growth and income increases across the board.
It has been a trying time for Americans since the recession began nearly two and a half years ago, and we still have a long way to go. We have provided much-needed relief to middle class families. That relief is indispensable to our efforts to return the economy to health and lay a new foundation for our future prosperity.
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