President Obama is expected to use tonight’s State of the Union Address to highlight a new series of taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. and spending initiatives to help middle-class families. These will include expanding the dependent care tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. (DCTC) and boosting education spending.
What will be missing from the President’s speech and all the subsequent analysis is any review of how much government is already doing for the so-called middle-class, why current programs have not worked, and why we need new ones.
Regarding the first question, last year Tax Foundation economists estimated that families in the statistical middle (earning between about $49,000 and $65,000) currently receive $1.35 in government spending for every dollar they pay in taxes, while families in the 50th to 60th income range ($65,000 to $86,000) receive $1.15 in government spending for every dollar they pay in taxes.
Since the majority of middle-income families are receiving more in government spending than they currently pay in taxes, a few questions come to mind:
√ If current programs are not making them better off, shouldn’t we fix or eliminate those before we create new ones?
√ Do middle-income families know or perceive how much is being spent on their behalf now? If not, then is that lack of perception due to the failure of these programs or is so much wasted they never feel the benefits?
√ Do these families even value the spending that is currently being made on their behalf? If not, maybe they don’t want or need more programs.
The bottom line from the Tax Foundation study is that the government is already redistributing more than $826 billion annually from the top 40 percent of families to the bottom 60 percent. The question for the President is why that amount of redistribution is not enough and how more will magically make the middle class better off.
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