Average Toledo worker will benefit from Obama reinvestment packageWritten by Lori Golaszewski | | email@example.com
If passed by Congress, the $825 billion economic recovery package introduced by Democrats in the House of Representatives on Jan. 15 would utilize spending and tax cuts to boost the ailing economy.
The proposed stimulus plan, called the “American Recovery and Reinvestment Bill of 2009,” calls for about 60 percent, or roughly $550 billion, in new spending and 40 percent, or $275 billion, in tax cuts.
The tax cuts would be achieved through a reduction in Social Security withholdings in employee payroll checks. Individuals would receive up to $500 and families up to $1,000 on the first $8,100 of income.
If they were to go into effect, the average worker would benefit from the tax cuts immediately, which are aimed at boosting consumer spending, said Charles Boxell, instructor of accounting at Owens Community College.
“It’s a borrow-and-spend policy,” he said. “You use income tax reductions to get more money in one’s pocket. How long these proposed tax cuts would remain in place is uncertain at this time, but it is likely that some of the cuts would only be temporary.”
The stimulus package also includes funding to increase unemployment benefits and job training, as well as food stamp benefits. Despite talk about the possibility of suspending income taxes for those collecting unemployment, Boxell noted that a specific plan addressing this issue has not been outlined.
Aside from his goal of stimulating the economy through tax cuts, Boxell said President Obama is also most likely focused on fulfilling his campaign promise to change tax rates to redistribute the wealth to low- and middle-income Americans.
“The Obama plan would place a heavier tax burden on upper-level incomes by increasing upper-level income tax rates while lowering the tax rates for most married taxpayers earning less than $200,000 ($100,000 for individuals) per year,” he said.
“Originally, the plan was to reduce taxes for taxpayers earning less than $250,000 per year, but the numbers keep changing as more politicians get their hands into the debate over what to cut and how to do it.
Nonetheless, it does appear that $200,000 is the breakpoint, although the amount of the rate reductions and corresponding rate increases for upper-level earners is uncertain at this time and is dependent upon the total amount of tax reduction the administration has targeted to achieve through its stimulus plan.”
Boxell said the controversial alternative minimum tax, or AMT, an extra tax paid on top of one’s regular income tax, has the potential to be reformed under President Obama’s administration because it has been imposed on more than the high-income earners for whom it was originally intended.
The alternative minimum tax was imposed in 1969 for only a few high-level taxpayers, but it has affected an unintended large number of people,” Boxell said. “The tax is projected to affect some 10 million taxpayers by 2010 if not changed or repealed. While no specific plans are available, the Democratic approaches in the past have been aimed at eliminating the alternative minimum tax and replacing it with an additional tax on upper-level
Also set to expire in 2010 are tax rates related to dividends and capital gains, Boxell said, as well as the estate tax, all of which President Obama may choose to reform.