Senator Bayh recognizes that middle class families are working harder than ever and receiving less. Across Indiana and the nation, working families face unprecedented challenges in their daily lives – jobs lost as a result of unfair trade practices in the global market; the dream of a college education becoming further out of reach because of rising tuition costs; mounting concerns over their retirement security; health care costs skyrocketing; and soaring energy costs hitting at the gas pump and utility bills. As Indiana Governor, Bayh passed a $1.3 billion tax cut, the largest tax cut in state history at the time of its enactment. On Capitol Hill, Senator Bayh is aggressively leading the fight to provide middle class families with tax relief to help them meet these challenges and create more opportunities for them and their children.

Easing the Burden on Middle Class Families

Far too many middle class families are struggling with the growing costs of raising a family and caring for aging parents, and Senator Bayh continues to push for legislation to help ease that burden. He is a cosponsor of The Middle Class Opportunity Act, which would increase and expand tax credits for children, families and seniors. To help families with the high costs associated with the first year of a child's life, the child tax credit would be doubled to $2,000 for a child's first year. In addition, families would be able to deduct as much as 35 percent of child care costs from their taxes, as opposed to only 20 percent today. And, for the first time, families who care for an aging parent or grandparent would be able to claim an elder tax credit even if that person does not live in their home.

Tax Relief for Students and Families

To ease the burden middle class families face with rising tuition costs, Senator Bayh authored legislation that was overwhelmingly passed by the Senate to make permanent the income tax deductions to help pay for college. The college tuition tax deduction, created in 2002, allows a $4,000 deduction for individual taxpayers with incomes below $65,000 and married couples with incomes below $130,000. It provides a deduction of $2,000 for singles with incomes below $80,000 and married couples with incomes below $160,000.

Recognizing that families often encounter a confusing tax code when it comes to higher education tax credits, Senator Bayh introduced the Universal Higher Education and Lifetime Learning Act. The legislation simplifies the tax code by consolidating the Hope Credit, the Lifetime Learning Credit and the tuition tax deduction into one simplified and expanded $3,000 per student tax credit. Additionally, the legislation offers a 50 percent refundable credit for the one-third of American households that do not have federal income tax liability.

Providing Property Tax Relief

According to the U.S. Census Bureau, state and local property taxes increased 50 percent from 2000-2006. Over the same period of time, inflation increased by only 17 percent and median household income actually dropped by 2 percent. In response, Senator Bayh passed legislation that will correct an inequity in the tax code and provide federal tax relief for homeowners, including nearly one million Indiana homeowners who have been hit with high property tax bills following the 2007 Indiana reassessment. Under Bayh's Homeowner Tax Fairness Act of 2007, homeowners who do not itemize their federal income taxes will be allowed to claim a new standard deduction for their state and local property taxes. Currently, homeowners who itemize can deduct the full amount of their state and local property taxes, while non-itemizers cannot. Nearly one million Hoosier homeowners, including many low-and middle-income seniors, do not itemize their federal income tax returns and could qualify for tax relief under the Bayh legislation.

Eliminating the Marriage Penalty

Senator Bayh has been a leader in the fight to make the tax code fairer for married couples by eliminating the marriage penalty. He introduced the Targeted Marriage Tax Penalty Relief Act, which would reduce the marriage penalty by providing a non-refundable marriage credit and adjustment to the earned income credit. He also introduced bipartisan legislation to accelerate and make permanent the marriage penalty provisions that were in the 2001 tax cut. Most recently, Senator Bayh successfully passed an amendment that provided for permanent marriage penalty relief in the federal budget. Nearly 30 million couples would see an average of $686 in relief if the marriage penalty relief became permanent.

Cracking Down on Tax Cheats

To make the tax code fairer and simpler for taxpayers, and help close the $17 billion capital gains “tax gap,” Senator Bayh introduced the Simplification Through Additional Reporting Tax (START) Act in February 2007. This legislation would require brokerage houses and mutual fund companies to track and report to taxpayers and the IRS investment information related to capital gains taxes, making it easier for taxpayers to file their tax returns and helping the IRS crack down on would-be cheaters.

To ensure that corporations pay their fair share, Senator Bayh introduced legislation to close the infamous “Bermuda loophole,” which allows companies to use an overseas post office box to avoid paying taxes. A modified version of Senator Bayh’s proposal was included in the Job Creation Act of 2004, which removed the benefits for companies that attempt to avoid paying taxes in this way after March 2003.

Help for Working Families

In 2008, Senator Bayh was part of a bipartisan group in Congress who supported an economic stimulus package that provided targeted tax relief to working families to help give a boost to the nation’s economy. The stimulus payment returns $600 to the pockets of individuals and $1,200 to middle class families to help them meet the mounting challenges of an increasingly rocky economy. Additionally, Senator Bayh has focused on providing working families with much needed tax relief to help meet the costs of raising a family, caring for aging parents and keeping the dream of a college education within reach.