Easing the Middle Class “Squeeze”

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In recent years, the wages of the average U.S. worker have stayed the same while the costs of mandatory expenses including health care, housing, energy, and education have skyrocketed. Rising inequality in wealth and income threatens the middle class’ role as the foundation of the U.S. economy.

Rep. Tom Allen speaks at a press conference to introduce the Middle Class Opportunity Act at the home of Mike and Sandy Martin in Saco.

Families are struggling with the costs of supporting young children, college bound teenagers and aging grandparents. With well paying jobs with good benefits becoming harder to find, parents are forced to work longer hours while spending less time with their families. Working families who once felt comfortably middle class and could focus on increasing their prosperity through education, entrepreneurship, and investment now face fears that their financial security could be threatened by just one severe illness or a small increase in mortgage interest rates.

Legislation

The Middle Class Opportunity Act

Rep. Tom Allen has introduced the Middle Class Opportunity Act (H.R. 2902), a bill to help hard working families in Maine and around the country. H.R. 2902 would:

Increase the Child Tax Credit for the First Year: The bill would double the tax credit for a child for the first year it is claimed (usually the year of a child’s birth or the first year an adopted child is in the household), from $1,000 to $2,000. The credit would begin to phase out at incomes of $110,000 for joint returns.

Expand the Dependent Care Credit: The income threshold for the phase out of the dependent care tax credit would begin at $75,000 rather than the current $43,000. Therefore, the full credit—35 percent of qualified expenses—would be available to families making up to $75,000. The legislation also expands the dependent care credit to include not only care for children and dependent parents living with the taxpayer, but also care for incapacitated parents or grandparents who do not reside with the taxpayer.

Create an Education Tax Credit: The bill would combine three existing education tax incentives (the Hope and Lifetime Learning tax credits and the college tuition tax deduction) into one simple, easy to understand Education Tax Credit for higher education. This credit would be available for up to $2,500 per student, with up to three students eligible per household, and would cover expenses for tuition, fees, and textbooks. The credit would begin to phase out at incomes of $140,000 for joint returns.

Relief from the Alternative Minimum Tax (AMT): In 2006, about 4 million taxpayers paid the AMT, a tax established decades ago to ensure that very high income households paid at least some tax, but which is hitting more Americans each year because it is not indexed for inflation. If a remedy is not put in place for 2007, 19 million additional taxpayers will have to pay the AMT. According to the Maine Taxpayer Advocate, in 2005, 54 taxpayers in Maine making between $30,000 and $50,000 paid the AMT, along with 249 taxpayers with incomes between $50,000 and $75,000. If Congress does not fix the AMT, far more 23 million middle income families in America, including more than 71,000 in Maine, will pay higher taxes because of the AMT. H.R. 2902 would provide AMT relief for 2007 and 2008, giving Congress time to craft a permanent fix for this problem.

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