Balance Can Save Struggling Families & Our Nation From the “Fiscal Cliff”
With elections behind us, our national leaders are returning to Washington for this Congress’ final weeks of session, and must come together on a plan to avoid the dangers of the so-called “fiscal cliff.” But what is that cliff, and what does it signify for Americans in need?
The cliff refers to two things, and their combined effects:
- The Dec. 31 expiration of a series of important tax cuts. These include the end of not only lowered income tax rates, but of improvements in the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC), as well as the very existence of the American Opportunity Tax Credit (AOTC) – tax cuts that focus help on those families who need it most.
- The January 2013 start of automatic, across-the-board cuts in federal spending on everything from education, health, and human services to national defense programs. These extremely deep cuts, known as “sequestration” measures, will take place annually for 10 years with a goal of reducing the federal deficit.
Economists say that, together, these budget cuts and tax increases would boost unemployment rates and push the nation back into recession over the course of several weeks and months. That’s a significant point to underscore: These troubling changes wouldn’t happen overnight, in January. This means the President and Congress do have a little time to act thoughtfully to avert these effects, even several weeks into the new year – but act they must, and soon!
To protect our nation’s economic recovery and struggling households, the best solution remains a balanced approach to tax policy, budget decisions, and deficit reduction that’s based on:
- Fewer and more deliberately selected budget cutsthat are better-tailored to blunt the effects that would be felt most sharply by low- and moderate-income families. Such families have already suffered disproportionately in the last several years and would stand to lose the most from indiscriminate, across-the-board cuts.It’s important to note that federal policymakers already have slashed more than $1.5 trillion worth of priorities – from education and medical research to low-income housing assistance – in the last couple of years.
- The retention of only those tax cuts that target low- and middle-income families, starting with preservation of the EITC, CTC, and AOTC in their current form. Unlike very wealthy households that have benefited the most from the past decade of tax cuts, struggling families simply cannot afford to dig more deeply into their shallow pockets to pay higher income taxes.Such families already pay disproportionately more than the wealthy in local, state, and other federal taxes. And all our deficit-reduction efforts so far have settled-on budget cuts – not on the raising of any new revenues from households that can actually afford it.
Call your U.S. Representative and Senators through the Capitol switchboard at (202) 224-3121. Ask them, today, to avoid the “fiscal cliff” with (a) new revenues from expiring tax cuts for the wealthiest households, as well as (b) carefully crafted budget cuts that avoid multiplying the troubles of low- and moderate-income families, rather than dangerous, across-the-board cuts.
By Sean Noble, Director of Public Policy & Research