Tax Day is just around the corner. As Americans across the country file their taxes, it's worth taking a look at the progress we've made and the ongoing work in making our tax code fairer.
Back when Senator Obama was running for President in 2007, he said:
“Our tax policy has been skewed toward the top 1 percent and away from the middle class, [and] working class in this country. Reversing that would make a significant difference. That's not trivial.”
So from day one of his presidency — even during the worst recession since the Great Depression — the President fought for and passed significant tax relief for nearly all working families, and for small businesses. For the typical middle-class family, those tax cuts totaled $3,600 over the first four years. He also worked to help ensure that the wealthiest Americans pay more of their fair share in taxes.
Here's a look at what the President has done to make the tax code fairer:
From the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) for working families, to the American Opportunity Tax Credit (AOTC) for college tuition, President Obama expanded tax credits that provide about 24 million working and middle-class families a year a tax cut of about $1,000.
- The EITC and CTC expansions, first put in place in 2009 and recently made permanent, now provide about 16 million working families a year with an average tax cut of about $900.
- The AOTC provides a maximum credit of $2,500 per year for the first four years for students and families paying for college â€“ thatâ€™s up to $10,000 per student. Altogether, this tax credit provides a tax credit of over $1,000 on average for nearly 10 million families, compared to prior law.
He also permanently extended tax cuts for 98 percent of Americans that had originally been set to expire after 2010. Now, middle-class federal income taxes are near historic lows.
In fact, the typical middle-income family is paying lower federal income taxes than in almost any other period in the last 60 years.
However, for too long, inequities in the code have left some wealthy families paying a lower rate than many working families. So that's why President Obama reversed tax cuts that cut top tax rates for high-income Americans, including by restoring the top income tax rate to its Clinton-era level. Altogether, reversing tax cuts for the wealthy will reduce the deficit by more than $800 billion over the next decade.
Since these changes became effective in 2013, it's clear the highest-income Americans have been paying more of their fair share. For example:
- The richest 400 people in the United States â€“ who earned more than $264 million each on average in 2013 â€“ saw their effective tax rate rise by more than a third in 2013, from 17 percent to 23 percent, implying they paid about $6.5 billion more in taxes than they would have under the older rules.
- The richest 0.1 percent of people in the United States saw their tax rates increase by more than 6 percentage points in 2013 to 28 percent on average, implying that they paid more than $50 billion more in taxes than they would have under the older rules.
And despite the predictions of those who defended tax breaks for the wealthy, the economic recovery has continued and even strengthened since President Obama ended them.
This is important progress, but our work is not done yet. That's why the Presidentâ€™s called on Congress to close unfair loopholes, including the corporate inversions loophole â€“ while also providing additional tax relief for middle-class and working families to make their paychecks go further in covering costs like child care, education, and retirement.
In the months he has left, the President will continue to work to make the tax system fairer, help working and middle-class Americans get ahead, and make the economy stronger.