Three general features of
the plan are most striking. First, it is tightly targeted at the middle class families who need
help most. About 85 percent of the tax benefits will go to families that earn less than $100,000
per year. Second, the President's proposal invests in those who are investing in our future:
getting an education, buying a home, raising a family. Third, every penny of the Middle Class
Bill of Rights if fully paid for by spending cuts--with billions left over for deficit reduction.
The Middle Class Bill of Rights has four components:
$10,000 Education Tax
Deduction: Americans can deduct from their taxable income the money they spend on
post-secondary education for themselves or their families. Once the policy isfully implemented,
up to $10,000 of education spending will be deductible each year. Taxpayers would not have to
itemize their deductions to get the education and training deduction. To focus the tax cut on
the middle class, deductibility is gradually phased out over the income range of $100,000 to
$120,000 for a couple filing jointly, and between $70,000 and $90,000 for individuals.
$500 Child Tax Credit: A $500 non-refundable tax credit will be allowed for each
child under the age of 13. This tax credit will be available to any family whose income is
less than $75,000 -- the families with young and growing children.
An Expansion of IRAs: The IRA proposal would expand the availability of deductible
IRAs to all middle income families. Working Americans with family incomes under $100,000
would be able to put $2,000 tax free into an IRA account and then be able to withdraw that
money tax free -- without penalty -- for education, medical expenses, or a purchase of a first
G.I. Bill for American Workers: This proposal takes nearly 70 different
training programs and consolidates them into one program that directly empowers workers with
skill grants and vouchers of $2,620 per year for up to 2 years. This proposal would be self-
financing too, since it uses existing funds from the previous programs. Workers who are laid off
or disadvantaged would also be eligible for income contingent loans through an expanded Individual
Education Account. This proposal centers on accountability and strong consumer information which
should weed out bad programs and reward those programs that successfully help workers get the
skills they need for new and better jobs.
The Middle Class Bill of Rights embodies the New
Covenant: helping people help themselves. It creates new opportunities for working American
families who are willing to take responsibility to make the most of those opportunities.