Let’s run through some numbers.
98% of Americans make less than $250,000 a year.
A large majority of Americans believe that this 98% should pay less in taxes, while the top 2% should pay more.
This week, President Obama announced that he intends to extend Bush-era tax cuts for the 98% of American earners and let expire the same tax cuts for the 2% of high-income Americans. If there is no extension, the tax cuts will expire on January 1, 2013.
His announcement comes in response to political talk surrounding the United States’ budget deficit. If Congress passes the tax-cut extension for the 98%, the budget deficit will grow by $150 billion in the next year.
But the tax extension also means big things for the individual household. If Congress does not pass the extension, the average household will pay an extra $2,200 in taxes per year. As The New York Times reports, President Obama plans to visit one of these households in Iowa to understand the effects of the tax-cut extension firsthand.
The tax-cut extension also benefits the majority of small business owners across the U.S. 97% of small business owners earn under $250,000 per year.
The announcement calls to the forefront the idea that middle class Americans are more likely to stimulate the economy than the top 2% of earners. They may be more inclined to put the money they save via tax cuts back into the economy, in contrast to high-income Americans, who fuel the economy through job creation. As the president puts it: “We don’t need more top down economics.”
Economists predict that Obama’s announcement won’t bring about any immediate changes with regards to government spending or tax cuts. Americans will need to wait until the November presidential election to see how things turn out.