Obama: eager to extend middle-class tax cuts

KOKOMO, Indiana Wed Nov 24, 2010 9:32am EST

President Obama returns to the White House following a daytrip to Kokomo, Indiana, November 23, 2010. REUTERS/Jason Reed

President Obama returns to the White House following a daytrip to Kokomo, Indiana, November 23, 2010.

Credit: Reuters/Jason Reed

KOKOMO, Indiana (Reuters) - President Barack Obama said on Tuesday the United States must extend tax cuts for the middle class but could not afford to do so for the wealthy, laying out his position before next week's meeting on the issue with Republicans.

Obama, who also told hard-hit Americans the U.S. economy was on the mend, said extending the middle-class tax cuts was critical to keeping the economic recovery on track.

"If we allow these taxes to go up, the result would be that a lot of people most likely would spend less. That means that the economy will grow less," he told workers at an auto plant.

Republicans, who won control of the House of Representatives in November 2 elections as voters punished Obama's Democrats for a sluggish economy and high unemployment, want to make the tax cuts permanent for all Americans.

Touting the success of his government rescue of the U.S. auto industry in a campaign-style rally, Obama welcomed news that U.S. economic growth was picking up.

He warned it had a way to go before it was out of the woods and said that meant government must not take money away from households likely to spend it.

"Next year, taxes are set to go up for middle-class families unless Congress acts," Obama said. "If we don't act by the end of the year, a typical middle-class family will wake up on January 1 to a tax increase of $3,000 per year."

Data released earlier on Tuesday showed that U.S. output grew at a 2.5 percent annual pace in the third quarter, up from a previously estimated 2 percent, reflecting stronger spending and export earnings than initially thought.

MEETING NEXT WEEK WITH REPUBLICANS

The president meets Republican and Democratic congressional leaders on November 30 to work out what to do about the Bush-era tax cuts and other pressing legislation to complete before a new Congress begins in January.

Obama says taxes should rise for families making more than $250,000 a year, but he has made extending cuts for middle-class families a top policy priority.

"This is actually an area where Democrats and Republicans agree," he said. "The only place where we disagree is whether we can afford to also borrow $700 billion to pay for an extra tax cut for the wealthiest Americans -- millionaires and billionaires. I don't think we can afford (that) right now."

Obama used his visit to highlight U.S. jobs saved by his multibillion-dollar taxpayer bailout of the auto industry, after a successful stock float by General Motors last week underscored renewed investor demand.

The bailouts were unpopular with many Americans. Obama wants to persuade the public they were worth the money, and used his visit to the Midwest, critical to his re-election chances in 2012, to sell that message.

"We're coming back. We're on the move. All three American (auto) companies are profitable, and they are growing," he said. "I want everybody to be absolutely clear, we are moving in the right direction."

(Writing by Jeff Mason and Alister Bull; Additional reporting by Deepa Seetharaman; Editing by Peter Cooney)

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Comments (11)
Darkstar wrote:
Please explain who is considered to be “middle-class” by the government? If I gross $250,000 BEFORE deductions and taxes am I middle class. If I net $250,000 after deductions and income tax, am I middle class? Many comments and media stories indicated it is NET income while other comments and stories indicate it is Gross income. It is difficult for me to believe that the middle class today nets up to $250,000 before becomming liable for increased income tax. But then, it is difficulte for me to believe that you are poverty stricken if your income is $3,500 per month.

Nov 24, 2010 10:43am EST  --  Report as abuse
Stock-MD.com wrote:
Tax rates are charged against “Taxable Income.” That is NET of exemptions and deductions. The proposed cut off which would be the top end of middle class also known as the upper middle class or as Bob Seger said, the UMC, is individuals making taxable income of $200,000 per year or couples making $250,000 per year.

The Republican argument against raising taxes above those amounts is that a lot of those people are small business owners who are the primary job creators in the country. The Democrats say that is not true. So the lazy partisan media just keeps reporting that argument and taking one side or the other instead of doing the research and telling us which side is lying.

The Republicans are dead set against raising any taxes before they see some real spending cuts. They have tried that before under both Reagan and Bush I and the spending cuts never happened. It is very similar to their position on immigration, they do not want to even talk about how to deal with the illegals that are already here until after the border is secured, but that is another discussion. Anyway, if Obama really does want middle class tax cuts extended then he is going to have to compromise with Republicans. That is something that he has been unwilling to do in the last two years.

I see two possible compromises. The first would be to extend all of the tax rates temporarily, maybe two years, and the other would be to raise the threshhold to $500,000 or $1 million per year and make the current rates permanent up to that amount and raise them permanently above that. The latter would be the best thing for the economy and jobs because a permanent change eliminates the uncertainty that is currently hindering businesses from making hiring decisions. The former is more likely to happen but not quite as good because it just kicks the can down the road.

Nov 24, 2010 2:48pm EST  --  Report as abuse
ElroyFromIowa wrote:
Congress shouldn’t waste their time on extending any tax cuts.

Instead lay the groundwork to pass a flat tax next year. 17% on every dollar earned in the US by a individual or a corporation. No deductions.

We’ll collect more taxes – especially on the rich. And everyone who works or investes will be invested in the country.

Nov 24, 2010 3:38pm EST  --  Report as abuse
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