President Obama on Tax Cuts and Unemployment Extension: "The Right Thing to Do"

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Last night, the President laid out the framework for a compromise that ensures no middle class family sees a tax increase, those looking for work keep their lifeline, and the economic recovery gets a welcome boost. While the debate over the tax cuts and unemployment insurance here in Washington has led to a lot of political positioning, the President stressed that the two parties needed to work together to prevent a tax increase for American families on January 1st :

I'm not willing to let working families across this country become collateral damage for political warfare here in Washington.  And I'm not willing to let our economy slip backwards just as we're pulling ourselves out of this devastating recession.

I'm not willing to see 2 million Americans who stand to lose their unemployment insurance at the end of this month be put in a situation where they might lose their home or their car or suffer some additional economic catastrophe.

So, sympathetic as I am to those who prefer a fight over compromise, as much as the political wisdom may dictate fighting over solving problems, it would be the wrong thing to do.  The American people didn’t send us here to wage symbolic battles or win symbolic victories.  They would much rather have the comfort of knowing that when they open their first paycheck on January of 2011, it won’t be smaller than it was before, all because Washington decided they preferred to have a fight and failed to act...

...As for now, I believe this bipartisan plan is the right thing to do.  It’s the right thing to do for jobs.  It’s the right thing to do for the middle class.  It is the right thing to do for business.  And it’s the right thing to do for our economy. It offers us an opportunity that we need to seize.

Today, the White House released a fact sheet outlining the framework agreement announced by the President. The agreement secures vital tax relief and investments in our workers that will create jobs and accelerate economic growth, much more so than most anticipated going into negotiations. The plan has three key elements along those lines:

  • 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.

The President closed his statement with a reminder of the harsh reality for American families if the leaders in Washington fail to act, and his focus moving forward on continuing the momentum of recovery:

There’s been a lot of debate in Washington about how this would ultimately get resolved.  I just want everybody to remember over the course of the coming days, both Democrats and Republicans, that these are not abstract fights for the families that are impacted.  Two million people will lose their unemployment insurance at the end of this month if we don't get this resolved.  Millions more of Americans will see their taxes go up at a time when they can least afford it.  And my singular focus over the next year is going to be on how do we continue the momentum of the recovery, how do we make sure that we grow this economy and we create more jobs.

Related Topics: Economy, Taxes
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