Tax and Budget: Your Questions Answered
On April 10, President Obama travelled to Florida to talk about the economy and what he called the essence of America - the idea that everyone who works hard should be able to do well. The President said:
America has always been a place where anybody who's willing to work and play by the rules can make it. A place where prosperity doesn’t trickle down from the top, it grows from the bottom; it grows outward from the heart of a vibrant middle class.
The President believes we should build an economy where everyone does their fair share and everyone plays by the same set of rules. Instead of giving more than a trillion dollars in tax breaks to the very wealthiest Americans—those who make more than $250,000 a year—we need to invest in the things like education and research and health care. President Obama has proposed the Buffett Rule to make sure that everyone does their fair share and plays by the same rules.
The Ryan-Republican budget,passed by the House of Representatives last month, fails the test of balance, fairness, and shared responsibility. Rather than ensuring that millionaires pay their fair share in taxes, it would provide an average tax cut of $150,000 for those earning more than $1 million per year.
Here in the White House we have been getting lots of feedback on the President’s plans and questions about the Ryan Republican Budget from citizens across the country who have called, e-mailed, tweeted and posted to express their opinions and ask questions. Below are responses to some of the questions, criticisms and misconceptions that we have heard so far.
Q. At a time when the economy is weak, why is the Administration focusing on taxing millionaires and billionaires?
A. We know that the strength of our economy depends in large part on our willingness to make the sorts of key investments – in education, infrastructure, clean energy, scientific research, and the like – that provide security for middle class families and a strong foundation for economic growth. We’ve tried the trickle-down economics that would convert these investments into more tax cuts for the wealthiest Americans on the hope that prosperity would trickle down to the middle class – and it has failed on a massive scale. Our history shows that prosperity in America has always spread from the bottom up, from the middle class out. A strong middle class benefits everybody, and gutting key investments in America's infrastructure, innovation and education hinders our entire economy.
That basic truth is particularly relevant today, as we’ve seen the share of national income earned by the very wealthiest Americans in recent years climb to the highest it's been since the 1920s. The top one percent of households—the wealthiest one out of every 100—now takes home 17 percent of the national income. The top .1 percent—the wealthiest one out of every 1,000 households—makes more than 7 percent of the national income.
Meanwhile, the average tax rate, for that .1 percent has dropped a stunning 50 percent over the last 50 years, from 51 percent to 26 percentincluding federal income and payroll taxes. This is nearly the lowest rate in over 50 years and is, in fact, one-half the rate they would have paid in 1960. Tax rates for middle-class families, who are earning a smaller percentage of the national income, have actually increased slightly during the same period.
The President believes that the most well-off Americans should contribute to deficit reduction by paying more, but under the President’s plan, all measures to raise additional revenue — including fundamental tax reform — are not effective until 2013.
Q. Does the Buffett Rule punish small business owners?
A. The Buffett Rule only applies to those making over $1 million—or about 3 out of every 1,000 Americans, according to IRS data, and those within that group that pay at low rates. Most of the very few true small business owners making over $1 million already pay ordinary income tax rates (and not the preferential rates) and thus would not be impacted at all by the Buffett Rule.
In addition, the President’s American Jobs Act focuses on tax cuts for small businesses that support hiring and investing — by cutting their payroll taxes in half, providing a full payroll tax holiday for increased hiring and wages, and extending 100 percent expensing on new investments. And that comes on top of 17 small business tax cuts the President has already signed into law, like the elimination of capital gains taxes on key small business investments.
Q. What can we do to help?
A. We encourage you to find out more about the President’s vision of an economy where everyone does their fair share and everyone plays by the same set of rules on WhiteHouse.gov. You can find details on what the President has proposed, and analysis of what the Republicans are proposing. We also encourage you to share the info you find at whitehouse.gov through Twitter. We are using the hashtag #fairshare for this debate, particularly for the work on the Buffett Rule which we will keep pushing on. You can also follow the Director of our Office of Public Engagement, Jon Carson, at @JonCarson44. You can email questions, comments or ideas to email@example.com.
Jon Carson is the Director of the Office of Public Engagement.
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