II. New Economy -

The Middle Class Bill of Rights

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 home.

• 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.