by Joel Johnson | July 24th, 2012
On Wednesday, the US Senate is expected to vote on two opposing tax proposals that would result in very different outcomes for low-income working Mainers.
One, by Senator Orrin Hatch (R-UT) would extend generous tax cuts for the top 2% of income earners in the country while simultaneously ending tax breaks for 13 million working families with 26 million children. It would also extend the “Lincoln-Kyl” estate tax provisions enacted in 2010 which exempt the value of an estate up to $10 million per couple and $5 million per individual and lowered the estate tax rate from 45 to 35 percent. In Maine, this would mean that over 35,000 families with 65,000 children would see a tax hike, while Maine’s wealthiest citizens continue to enjoy some of the lowest marginal tax rates in post-war history. These numbers come from a recent report by Citizens for Tax Justice (CTJ).
Senate Majority Leader Harry Reid’s (D-NV) proposal would extend all of the Bush tax cuts on income up to $250,000 per couple ($200,000 per individual) for one year. It would also extend recent improvements to a variety of tax credits that help working families, including the Earned Income Tax Credit (EITC), the Child Tax Credit (CTC) and the American Opportunity Tax Credit (AOTC), which helps families pay college tuition bills.
The CTJ report shows the impact of allowing the 2009 improvements in the refundable tax credits on low-income working families in Maine. According to CTJ’s estimates, if the Hatch proposal were to be enacted, 35,042 families with 64,730 children in Maine would lose a total of $21.5 million. The average loss per family would be $613.
Jobs and the economy should be the number one priority right now, but deficit hawks have forced Congress to act now to address our long-term deficit problem. To that end, we need a balanced approach that addresses both revenues and expenditures while avoiding policies that increase poverty or income inequality. The Reid proposal would be a first step in that sort of balanced approach, increasing the amount of revenue we have to help reduce the deficit and putting our nation’s working families and the economy on a path to greater fiscal health. The Hatch plan would aggravate inequality and make it harder for low-income working families to move up the ladder of economic opportunity. Rebuilding the middle class and helping low-income working families get there is good for the economy. Ending tax breaks for them is not.