Monday, November 22, 2010

Letter to Sen. Warner supporting unemployment insurance and tax credits for low-income families

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Dear Senator Warner,

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.


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