Tuesday, November 23, 2010

Letter to Senator Webb supporting unemployment insurance and tax credits for low-income families

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Dear Senator Jim Webb,

Congress will address three critical issues when it returns this month: expiring emergency
unemployment benefits, expiring tax cuts enacted in 2001, and setting discretionary spending
levels for the current fiscal year.

Please stand with middle-class and struggling working families by supporting the following
policies:



Continuing federal emergency unemployment benefits through next year.



Extending only those tax cuts targeted to lower- and middle-income families, while
ensuring the tax cuts for the wealthiest Americans expire this year as scheduled.



Enacting an FY 2011 omnibus appropriations bill and opposing drastic cuts in non-
security discretionary spending.

Our highest priority right now must be to put people back to work and get the economy going
again. Taken together, these policies will strengthen the economy, create jobs and reduce
hardship in the short run. And by ensuring the wealthiest are paying their fair share of taxes, we
can start to address the nation’s long-term budget challenges.

Extending Federal Unemployment Insurance

The temporary federal emergency unemployment benefit program expires on November 30th for
most unemployed workers. Unemployment insurance is a bedrock middle class program that
helps tide families over during hard times when a breadwinner loses his or her job. Under this
program, jobless workers who exhaust their regular 26 weeks of state unemployment benefits
but haven’t been able to find a job can receive additional weeks of federal benefits while they
keep looking for work. This is particularly important now when almost half of those who are out
of work have been unemployed for six months or longer. Over 5 million Americans currently
receive these benefits each month.

Our nation has gone through the longest, and by most measures the worst, recession since the
Great Depression. In Virginia alone, 129,400 jobs have been lost since the recession began in
December 2007, raising our unemployment rate to 6.8 percent (3.6 points higher than before the
recession). 285,000 of our neighbors are unemployed.

Until the economy recovers and workers can find jobs, families need unemployment benefits
to help them pay the mortgage or rent, heating bills, and other day-to-day expenses. Allowing
the emergency benefits to lapse now would increase hardship. The National Employment Law
project estimates that 30,871 workers in Virginia would lose their federal benefits during the
month of December, and the approximately 200 workers a day who exhaust their regular state
benefits without finding a job would not have access to any federal benefits.

Allowing the emergency benefits to lapse now would also be bad for the economy. Providing
these federal UI benefits is one of the single most effective ways to create jobs and stimulate
economic growth. If Congress terminates federal unemployment benefits at the end of
November, or continues the program for only a few months, millions of unemployed workers
and their families will lose much or all of their income — resulting in a sizeable drop in
consumer spending. Businesses would then sell fewer goods and services, and would have to

lay off even more workers, causing still higher unemployment and making the economy even
weaker.

This program should be temporary — Congress has always ended emergency benefits once the
economy is back on a sound footing. But five unemployed job seekers are currently available
for every job opening and the unemployment rate is projected to remain above 9 percent
through at least 2011. Never since World War II has Congress terminated emergency federal
unemployment benefits when the unemployment rate was 7.2% or higher. Congress must act
now to continue this critical federal unemployment benefit program through next year.

Extending Middle and Moderate Income Tax Cuts

The most important step Congress can take now to improve the long-term budget picture
would be to let the tax cuts that only benefit high-income people expire as scheduled at the
end of 2010. Congress should, however, support middle-class and struggling working families
by extending the middle-class tax cuts (which would also benefit the wealthy) as well as the
improvements made in 2009 to tax credits targeted at low- and moderate-income working
families.

Extending all of the 2001 tax cuts, as some recommend, would be fiscally irresponsible. The
high-income tax cuts are extremely costly: extending them would cost about $40 billion in the
first year and $90 billion over two years. Moreover, if Congress extends the high-income tax
cuts for a year or two now, it is likely to continue extending them, which would cost about $1
trillion (including interest costs) over the next decade.

Some argue that allowing the high-income tax cuts to expire would harm the economy. But the
Congressional Budget Office (CBO) has found that extending those tax cuts would be the least
effective way to strengthen the economy. An employer payroll tax cut for firms that hire more
workers would create four to eight times as many jobs as extending the high-income tax cuts.

Some also argue that allowing the high-income tax cuts to expire would harm small businesses.
The facts show otherwise: small businesses are indeed an important source of jobs, but the
vast majority of them don’t have incomes high enough to be affected by changes in the top two
marginal income tax rates. In fact, allowing the two top tax rates to return to their pre-2001
levels would have no impact on 97 percent of taxpayers with business income. Extending the
middle-class tax cuts would benefit all small businesses.

In addition, Congress should extend the improvements made last year in the Child Tax Credit
and in the marriage penalty relief in the Earned Income Tax Credit (EITC). These improvements
promote work, are pro-family, and would be far more effective in generating economic growth
than tax cuts for the wealthiest. If they expire, more families may be forced to turn to public
assistance.

Here’s why. A parent working full time at the minimum wage and raising two kids would see
her child credit slashed from $1,725 down to $250 if Congress fails to extend the child credit
improvements. This is a significant loss in income for someone who makes $14,500 a year and
is raising two children.

Similarly, the expanded marriage penalty relief in the EITC reduces the financial penalty some
low-income working couples receive when they marry by allowing married couples to receive
larger benefits.

In today’s weak economy, these credits have a big impact not only for struggling working
families but also for businesses in our state. In Virginia, 295,000 children would lose some or
all of their child credit and 114,000 families would lose some or all of their EITC benefits if the
improvement made in 2009 expire. We know these households will turn around and use these
credits to pay their mortgage or rent, to buy groceries, to pay utility bills and to provide other
day-to-day necessities thereby bolstering the economy. According to CBO, policies that increase
the resources of families with lower incomes have a larger short-term economic impact than
policies that increase resources for families with significantly higher incomes. Further, taking
these tax credits away now, when unemployment is high, and millions of families are struggling,
will create further drag on the economy.

Providing Adequate Discretionary Funding

We strongly urge you to enact an omnibus appropriations bill for FY2011 with adequate
discretionary funding to sustain cost-effective investments. We also urge you to reject efforts to
enact a continuing resolution that puts off decisions on funding until next year. .

We are alarmed at indications that Congress may slash non-security spending levels in the
Omnibus Appropriations bill. We share concerns about the impact that deficits will have on
our economy over the long run, but right now Congress needs to focus on putting people back
to work and getting the economy going again. Slashing spending now would only weaken our
economy and most likely exacerbate job losses. Deep cuts would cause significant harm to states
which continue to face huge budget deficits and already are cutting education, human services,
and other critical programs for seniors, poor children and other vulnerable groups.

Conclusion

Congress will have to make some difficult choices in the coming weeks. By making the right
choices, it can not only strengthen our economy by supporting struggling families and protecting
key investments, but also start to address long-term deficits by ending the large and unaffordable
tax breaks enacted in 2001 for the wealthy. We urge you to cast responsible votes on the above
issues, which are so critical to the economy and families in Virginia. Thank you for your
consideration.


Voice of Vietnamese Americansw


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