Obama's Budget: Good News for Working, Middle Class
While the wealthy suffer under the president's plan, the little guy benefits.
— -- President Obama's sweeping budget outline, released Thursday, would raise taxes on the wealthy as it offers a range of cash-saving initiatives for the middle and lower classes. It touches broadly on the typical household budget — from retirement savings and health care costs to college tuition.
The plan "means a lot of good news for both middle-class families who have been struggling to keep their heads above water and now are in danger of sinking, as well as working-class and lower-class Americans whose heads haven't been above water for some time," says William Galston senior fellow at the Brookings Institution, a research and public policy institute. The plan's goals:
•Provide tax relief:Millions of taxpayers would receive a permanent break of up to $400 for individuals and up to $800 for couples. "For an American that makes about $200 per paycheck, assuming a few other variables, that's an extra $13," says Mark Steber, vice president of tax resources for Jackson Hewitt. "It's additional money in their pocket."
•Expand earned income tax credit:This tax credit is among the "bigger tax credits both in size and scope," says Steber. In the past, there has been a limit based on "how much money you make and how many children you have," he says. Obama's plan calls for making the credit permanent, as well as expanding the financial benefits for those who qualify.
•Make college more affordable:The plan not only has provisions for reduced interest rates for student loans, it also calls for a permanent tax credit — up to $2,500 annually, based on education expenditures — for those who qualify. This could help families with their college cost budgeting, says Galston.
•Bulk enrollment in retirement plans:The plan calls for employer assistance so they can "set up the systems they need to directly deposit worker contributions to IRA accounts if they don't offer workplace retirement plans," says Galston. Employers that offer 401(k) retirement plans would also have to provide mandatory automatic enrollment. "This would require them to do it, and then employees would be able to opt out," says Dallas Salisbury, CEO of the Employee Benefit Research Institute. This mandatory provision could be controversial, because it will increase administrative and employer costs during a tough economy, says Salisbury.
