Last week, the Congress passed and the President signed far-reaching legislation on tax cuts for all Americans. This bill was a compromise, worked out among public officials with differing views. Washington is supposed to work that way.
I voted for the tax legislation because it addresses my top priorities of economic growth, job creation, and providing both tax relief and tax certainty to millions of Americans in a fragile economy. There are some provisions of the legislation that I did not like, but I believe that new tax cuts will put additional money in the pockets of Pennsylvanians and will help create jobs. The tax bill also continues unemployment insurance for those who have been laid off through no fault of their own.
With this legislation and the tax cuts of over $312 billion in the American Recovery and Reinvestment Act of 2009, we will have cut taxes for Americans by a total of over $1 trillion in the past two years. I believe that these short-term tax cuts are necessary to help get us out of our current economic environment.
Here are the key provisions of the tax legislation:
- Federal Income Tax Reductions: The legislation extends current income tax rates for all American taxpayers at all levels of income for two more years.
- An Employee-Side Payroll Tax Cut of Approximately 2%: The legislation includes an employee-side payroll tax cut for over 155 million workers – providing tax relief of about $112 billion next year.
- Extension of Unemployment Benefits: The legislation extends emergency unemployment benefits at their current level for 13 months, preventing an estimated 7 million workers from losing their benefits as they search for jobs.
- The Child Tax Credit: The $3,000 refundability threshold established in the Recovery Act for the Child Tax Credit will be extended under the legislation, ensuring an ongoing tax cut to 10.5 million lower-income families with 18 million children.
- The Earned Income Tax Credit: The legislation continues a Recovery Act expansion of the Earned Income Tax Credit worth, on average, $600 for families with 3 or more children, and reduces the “marriage penalty” faced by working married families. Together, these enhancements to the EITC will help 6.5 million working parents with 15 million children.
- The American Opportunity Tax Credit: The new American Opportunity Tax Credit – a partially refundable tax credit that helps more than 8 million students and their families afford the cost of college – is continued under the legislation.
- 100 Percent Expensing: The legislation includes the President’s proposal to temporarily allow businesses to expense 100% of their investments in 2011, potentially generating more than $50 billion in additional investment in 2011, which will fuel job creation.
- 1603 Renewable Energy Grants: The legislation extends the 1603 program, which is helping to support tens of thousands of jobs in the wind and solar industries.
- Estate Taxes: There will be a $5 million exclusion and a 35% tax on estate values above the $5 million threshold.
Example: a working family with three children making $20,000 per year will continue to receive a tax cut of more than $2,000 as a result of the Earned Income Tax Credit and the Child Tax Credit expansions in the legislation. The same family would receive an additional $400 tax cut from the new payroll tax holiday. In addition, because the legislation extended income tax rates, this family’s income tax will be reduced by approximately $3,800 when compared to an expiration of the current tax rates.
Example: a working family with two children making $65,000 per year will continue to receive a tax cut of more than $2,000 as a result of the Child Tax credit expansion in the legislation. The same family would receive an additional $1,000 tax cut from the new payroll tax holiday. In addition, because the legislation extended income tax rates, this family’s income tax will be reduced by approximately $3,000 when compared to an expiration of the current tax rates.
As I said, this legislation is a compromise. I would have preferred not to extend tax cuts for the very wealthiest of Americans and I think the exclusions and rates on the estate tax are too generous to the same wealthy people. However, on balance, this legislation will be very helpful in reducing unemployment and generating economic growth for all our citizens. That is why I voted to approve this tax cut legislation.
Sincerely,
