President Clinton has worked to deliver tax relief to America's working families. In 1993, the President delivered a tax cut to 15 million working families through an expanded ETC.. Then, in 1997, the President delivered a $500 child tax credit and $1,500 HOPE Scholarships to make the first two years of college universally available. The result: the lowest federal tax burden in two decades for a typical middle-income family. To build on this record of tax relief for working families, President Clinton proposes significant new tax relief for America's working families:
USA Accounts -- A $536 Billion Tax Cut Over 15 Years
The President's plan would allocate 12 percent of the projected surpluses to create new Universal Savings Accounts (USAs) so all working Americans can build wealth to meet their retirement needs. Elements of this powerful new tax incentive -- the USA account -- could, for example, include:
Automatic flat annual contributions for low and moderate working Americans;
An additional tax incentive to match a portion of each dollar on a progressive basis that an individual voluntarily contributes.
Additional Tax Cuts for Working Families
The President's budget provides $34 billion over five years in additional paid-for targeted tax relief to modernize our schools, to help working families care for elderly parents, and to better afford child care. Highlights of the President's tax relief plan include:
Make Health Care More Affordable
· A $1,000 Long-term Care Tax Credit to help pay for formal and informal long-term care services for about 2 million Americans, including 1.2 million older Americans, over 500,000 non-elderly adults, and approximately 250,000 children at a cost of $5.6 billion over five years.
· A $1,000 Tax Credit for Work-related Expenses for People with Disabilities to help cover the formal and informal costs that are associated with employment, such as special transportation and technology needs. This tax credit will help 200,000 to 300,000 Americans, and costs $700 million over 5 years.
Expand Education Tax Incentives
· Tax Credits to Build Modern Schools for Our Children. A centerpiece of the President's tax cut agenda is to provide Federal tax credits to pay interest on nearly $25 billion in bonds to build and renovate public schools. Two types of bonds are being proposed: School Modernization Bonds ($22.4 billion) and Qualified Zone Academy Bonds ($2.4 billion). $400 million of the school modernization bonds will go to tribes or tribal organizations for the construction and renovation of BIA funded schools. The tax credits on these bonds will cost $3.7 billion over 5 years.
· Other Education Tax Incentives include the elimination of the 60-month limit on student loan interest deduction at a cost of $281 million over five years; an 18 month extension and an expansion of the tax- favored treatment of employer provided education (Section 127); a new 10% credit for employer-provided workplace literacy and basic education programs; a 50 percent credit for corporate sponsorship payments to qualified zone academies.
Make Child Care More Affordable
· Tax Relief for Child Care for Three Million Working Families, Plus Tax Relief to Parents Who Stay at Home. The President's proposal increases the child and dependent care tax credit (CDCTC) for families earning up to $59,000, providing an additional average tax cut of $345 for these families and eliminating income tax liability for almost all families with incomes below 200% of poverty ($35,000 for a family of four) that claim the maximum allowable child care expenses. The President also proposes to enable parents who have children under one year old to take advantage of the CDCTC by allowing them to claim assumed child care expenses of $500. The President's budget proposal will provide an average tax credit of $178 and will benefit 1.7 million families. Overall, this combined proposal costs $6.3 billion over five years.
Provide Incentives to Revitalize Communities
· Better America Bonds. The President is proposing Federal tax credits to pay the interest on $9.5 billion in bonds over five years for investments by state, local and tribal governments. The bonds can be used to preserve green space, create or restore urban parks, protect water quality, and clean up brownfields (abandoned industrial sites). The cost is $673 million over five years.
· New Markets Tax Credit. To help spur $6 billion in new equity capital for investment in America's New Markets, President Clinton is proposing a tax credit worth up to 25 percent for investments in a wide range of vehicles targeted to underserved communities, including community development banks, community development corporations and venture capital funds, and new targeted investment vehicles proposed by President Clinton known as America's Private Investment Companies (APICs) and New Market Venture Capital Firms. A wide range of businesses could be financed by these investment funds, including small technology firms, inner-city shopping centers, manufacturers with hundreds of employees, and retail stores. The proposal costs roughly $980 million over five years.
· Increase the Low-Income Housing Tax Credit. To expand and improve the supply of available low income housing, the budget raises the allocation of low-income housing tax credits to States. The President proposes to raise the State per capita cap from $1.25 to $1.75 beginning in 2000 at a cost of $1.7 billion over five years. This increase will lead to an additional 150,000 to 180,000 units of affordable housing over five years.
Increasing Energy Efficiency and Improve the Environment
· Tax Credits For More Fuel Efficient Vehicles and Homes. The budget contains $3.6 billion over the next 5 years in tax cuts for energy-efficient purchases and renewable energy, including: tax credits of between $1,000 and $4,000 for consumers who purchase advanced-technology, highly fuel-efficient vehicles; a 15 percent credit (up to $2,000) for purchases of rooftop solar equipment -- to provide incentives for meeting the Million Solar Roofs goal; and a tax credit of up to $2,000 for purchasing energy-efficient new homes.
Extend Expiring Provisions
· One-year extenders package including the Work Opportunity Tax Credit, the Welfare-to-Work Tax Credit, and the R & E Tax Credit.
· Personal Credits and the Alternative Minimum Tax (AMT). The deductibility of personal credits, such as the $500 child tax credit, the HOPE Scholarship, the CDCTC, and Lifetime Learning tax credit against the AMT would be extended for two years -- tax years 1999 and 2000 -- at a cost of $1.4 billion over five years. Extending this provision will greatly simplify tax preparation for millions of families.
Curb Corporate Tax Shelters and Reduce Unwarranted Tax Subsidies
The $34 billion over five years in targeted tax cuts are paid for with proposals to curb corporate tax shelters and reductions in unwarranted tax subsidies. Addressing tax shelters is important to stem perceptions of unfairness and disrespect for the system. The budget increases disincentives for entering into abusive transactions and attacks specific tax shelter transactions. The Treasury will continue to study additional remedies for corporate tax shelters and will work with Congress to address this issue.
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