The economy was the centerpiece of President Obama’s first State of the Union address, delivered on Wednesday. As the president noted, “This recession has compounded the burdens that America's families have been dealing with for decades–-the burden of working harder and longer for less; of being unable to save enough to retire or help kids with college.”
Later in his speech, the president explained some of his administration’s efforts to target this problem: “That's why last year I asked Vice President Biden to chair a task force on middle-class families. That's why we're nearly doubling the child care tax credit, and making it easier to save for retirement by giving access to every worker a retirement account and expanding the tax credit for those who start a nest egg. That's why we're working to lift the value of a family's single largest investment–-their home.”
These are likely to be popular proposals, but they also highlight the return of what Boosting Paychecks author Daniel Gitterman calls “the Democrats’ dilemma”—choosing between targeting tax relief to working poor families who need it most or targeting it to moderate- and middle-income families who make up a much larger share of the electorate and who are also facing tough times.
Commenting on Wednesday’s speech, Gitterman, who serves as a senior policy adviser to North Carolina Governor Bev Perdue, noted:
“In 1993, Clinton expanded the EITC for working poor and moderate income families; after the 1994 Republican takeover, it was all about middle-income families.
“Obama is walking the same walk: Obama ‘08 recognized that ensuring affordable child care is critical to helping working parents get ahead. His plan was to reform the Child and Dependent Care Tax Credit by making it refundable and allowing low-income families to receive up to a 50 percent credit on the first $6,000 of child care expenses. This would benefit 7.5 million working mothers.
“Obama ‘10, in his State of the Union, called on Congress to nearly double the child care credit for families earning less than $85,000—which would lower by $900 the taxes such families owe to the government. But the credit would not be refundable, meaning that low-income families would not get cash payments if they owe no individual income taxes.
"It’s the Democrats’ dilemma redux.”
- See the full text of the State of the Union.
- Find more details on the administration’s middle-class agenda.
- Learn more about Boosting Paychecks.