The median household income in the United States, adjusted for inflation, remains several thousand dollars below what it was at its peak in 2000. In fact, according to a , median household income remains well below what it was when President Obama took office.
Those facts are worth keeping in mind when considering the tax proposals the president is expected to outline this evening to Congress and the American people in his State of the Union address, which administration officials previewed over the weekend. The president’s goal is to offer relief to the middle class. Given the stagnant incomes of so many American families in recent years, that goal makes perfect sense.
The devil is in the details, of course, and many details in Obama’s plan have no chance in a Republican Congress, especially plans to raise taxes. But Republicans would be making a mistake to dismiss the idea of middle-class relief out of hand. In fact, they should come up with their own ideas if they dislike Obama’s.
We’re certainly not enthusiasts for every item on the president’s lengthy agenda. For example, while Obama is right to look for ways to help families with children, tripling the tax credit for child care is not the ideal solution. A more equitable way to assist parents would be simply to expand substantially the tax credit for children. If families then want to use the added money to help offset child care expenses, they would be free to do so.
The president’s idea of a $500 “second earner” tax credit also deserves scrutiny. Shouldn’t a couple’s tax bill be based on their total income as opposed to how many contribute to it?
Meanwhile, though, his goal of expanding the Earned Income Tax Credit for childless workers is perfectly sound.
Republicans have wasted no time in blasting Obama’s goal of paying for middle-class breaks by hiking the capital-gains tax on the rich and cracking down on now-legal ways to avoid inheritance taxes. But they too should be looking to make the tax code fairer, and to eliminate some hard-to-justify breaks for the wealthy.
Two of our favorite fat targets: a tax break for fabulously wealthy hedge fund managers that allows them to treat income as capital gains, and interest deductions for second homes.
Household income has once again begun to inch upward — and the pace may accelerate now that unemployment has dropped so far. But that shouldn’t take the heat off elected leaders to concentrate their attention on those whose incomes still haven’t recovered from the hits of the recent past.
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