Summary:
The President’s Proposals To Expand Tax Breaks
For Savings, Childcare, Families And Philanthropy

President Clinton announced four major elements of his Targeted Tax Cut Package aimed at promoting savings, child care, family and philanthropy. These targeted tax cuts are part of an overall budget plan that maintains our fiscal discipline, makes investments in key priorities, strengthens Social Security and Medicare, and pays down the debt by the year 2013.

Specifically, the President’s targeted tax cut proposals include:

  • Retirement Savings Accounts To Help Families Save and Invest And Expand Pension Coverage for Small Businesses.
    The President’s Retirement Savings Accounts (RSAs) proposal will give 76 million Americans the opportunity to build wealth and save for their retirement through a progressive tax cut. The President’s proposal builds on the successful model of Individual Development Accounts (IDAs), extending generous matches to all low- and moderate-income families to encourage them to develop savings and assets. A person who participated for 40 years in this savings program could accumulate over $266,000 – enough to produce $24,000 a year of income in retirement. This proposal would cost $54 billion over 10 years.

    • In an effort to encourage more small businesses to offer pensions for their employees, the President will also announce a proposal to provide a 50 percent tax credit for qualified contributions to employees’ pensions. This provision would cost $17 billion over 10 years.

Reducing the Marriage Penalty for Married, Two-Earner Couples By Increasing the Standard Deduction
by More Than $2,000.

The President will propose to increase the standard deduction for two-income married couples to twice that of single filers, providing substantial tax relief for 9.1 million married couples. When fully phased in, this change would result in a $2,150 increase in the standard deduction. The President’s proposal would also increase the standard deduction by $500 for single-earner married couples and by $250 for single filers. Both elements of the President’s plan would cost $45 billion over 10 years and benefit 42.1 million families.

  • Helping Families Afford Child Care.
    President Clinton will include in his FY 2001 budget tax relief for families struggling to pay for child care. As part of a comprehensive child care initiative that includes subsidy assistance and new investments in child care quality, the President will propose to:

    1. make the Child and Dependent Care Tax Credit refundable for the first time;
    2. increase the level of the credit;
    3. extend the credit to parents who stay at home with their children. The President will also propose tax incentives to encourage businesses to provide child care for employees.

The child care package would benefit an estimated 8.1 million families and would cost $30 billion over 10 years.

  • Encouraging Philanthropy.
    President Clinton today will unveil a package of new tax proposals to encourage philanthropy.

    First, he will propose allowing non-itemizers to take a tax deduction for charitable giving.

    Second, he will propose new rules to make it easier for charitable foundations to make gifts in times of need.

    And third, he will propose making it easier for individuals to donate appreciated assets like securities and real property.

    These proposals would cost $14 billion over 10 year.

 

Background on Tax Breaks     State of the Union Home Page

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