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Middle Class: Fighting for the Middle Class

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America’s middle class is the engine of our national economy. When the middle class prospers, the whole country prospers. Unfortunately, under the Bush Administration, the middle class has been the victim of a reckless fiscal policy, corporate greed, and a Washington culture that rewards the special interests instead of hard working Americans’ best interests. Middle class families are feeling an economic pinch that makes it more difficult to balance work and family, send children to college, purchase a home, and handle skyrocketing energy costs.

Kay Hagan believes that Washington should act with middle class priorities in mind. When she is elected to the U.S. Senate, Kay will work tirelessly to enact policies that:

• Make the Tax Code Work for Middle Class Families
• Encourage Affordable Homeownership
• Promote Entrepreneurship and Innovation
• Lift the Debt Burden on the Next Generation

MAKE THE TAX CODE WORK FOR MIDDLE CLASS FAMILIES

The tax code of the 1990s promoted prosperity and economic growth across all segments of the population and ensured that all Americans paid a fair share of the tax burden. Middle class tax cuts helped consumers buy their own homes and send their children to college, while targeted tax relief, such as the Earned Income Tax Credit, lifted many working class Americans out of poverty. Unfortunately, the Bush tax cuts broke that winning formula. Instead of benefiting the middle class, the Bush tax code predominantly favors the extremely wealthy and special interests at the expense of middle class Americans, ultimately slowing our country’s economic momentum and shifting the tax burden to middle class Americans. Kay will fight to make our tax structure work for middle class families again – not just the wealthy and the special interests – to guarantee economic benefits for all Americans.

Revitalize Economic Growth Through Our Tax System. The Bush tax code does not reflect the values or priorities of a society that recognizes the contributions of the middle class. As a state senator, Kay worked hard to pass $840 million in tax cuts for North Carolina families. In the U.S. Senate, Kay will make permanent many of the tax cuts targeted toward middle class families and repeal the Bush tax cuts for the top one percent of earners. This tax relief will help middle class North Carolinians succeed in achieving the American Dream.

Standardize the Child Care Tax Credit for All Middle Class Families. A significant majority of mothers with young children now work outside the home, and this majority is likely to grow in the years to come. As a result, middle class families must rely on others to help care for their children. Paid day care can be more expensive than college – the average cost in North Carolina is $7,800 per year – and child care tax credits have not kept pace with these costs. Kay would support a standardized tax credit equal to 40 percent of child care costs for all middle and working class families. She wants to ensure that both parents can work if they choose to do so and have affordable child care for their children.

Simplify and Expand the College Tuition Tax Credit. Middle class families understand now more than ever how important it is for their children to attend college. Unfortunately, the costs of attending college have soared over the past decade, leaving many families with sticker shock as they determine whether or not they can afford the keys to prosperity for their children. In addition, the college tuition tax credits – the Hope Credit and the Lifetime Learning Credit – and the tuition tax deduction have confusing eligibility requirements and a variety of payouts. Kay would simplify and enhance the college tuition tax credit system by establishing a single tax credit worth $5,000 a year, good for four years of college education, that would replace the current complex system. The new tuition tax credit will help more middle class families send their high school graduates to college, where they will develop the skills they need to compete in the dynamic American economy.

Simplify Tax Filings. The current system of filing taxes is too complex and has too many loopholes. Kay believes we should simplify and streamline the filing system by sending the over 21 million tax filers eligible for the 1040-EZ tax forms with data already filled in from IRS records. This would allow taxpayers to simply verify the numbers and sign the return, eliminate duplication and costs, reduce wasted time and resources, and save middle class Americans money.

Raise the Minimum Wage and Expand EITC. In tough economic times like these, working families need our help, not hindrance, to make ends meet and get ahead. Kay’s record in the state Senate on behalf of working families is clear: she has voted to increase the minimum wage to help families in North Carolina. As a U.S. senator, she will support regular increases in the minimum wage. Furthermore, Kay believes Congress should simplify and expand the Earned Income Tax Credit to help working families.

ENCOURAGE AFFORDABLE HOMEOWNERSHIP AND HOUSING

Across North Carolina, many middle class families worry about the plummeting value of their homes or agonize over the possibility that they will lose their home because they cannot afford the mortgage payments. Meanwhile, other middle class Americans worry about how to meet the costs of homeownership or buy their first home in a tough economy. Kay believes that even in the midst of our mortgage crisis, we must encourage responsible homeownership. She will support several measures to incentivize homeownership and to minimize costs associated with it.

Reform the Homeownership Tax Deduction. The current mortgage interest deduction permits homeowners to deduct from their taxes the interest paid on mortgages for their homes and for certain home equity loans. However, the law governing this tax deduction limits its availability to taxpayers who itemize their taxes, which constitutes less than one-third of taxpayers overall. Kay will support legislation that permits homeowners who do not itemize their taxes to invoke a standard mortgage interest deduction on their tax forms. This measure could encourage as many as 10 million working and middle class Americans to buy their own home and consequentially create family assets.

Extend the First-Time Homebuyer Tax Credit. Earlier this year, Congress enacted the Housing and Economic Recovery Act of 2008, which created a temporary tax credit for working and middle-class Americans seeking to buy their first home. Given the economic climate of the country, Kay believes Congress should extend this first-time homeownership tax credit for another year, along with increasing the maximum credit from $7,500 to $10,000. These modifications would allow Americans hit hard by the financial markets, including those who faced extended periods of unemployment before finding new jobs, to rebound and to buy their own homes.

Ensure Loan Options For Borrowers. Kay is committed to helping applicants find affordable home loans. Many individuals and families are having trouble obtaining loans from private lenders due to increased credit and down payment requirements in light of the current credit crunch. Kay would work with lending institutions, existing government loan programs, non profits and community organizations to ensure that North Carolinians with stable incomes who agree to financial counseling are given the opportunity to become responsible homeowners in homes they can afford. Kay will demand accountability and oversight from both the borrower and the lender in order to help these hardworking families and promote stability within communities.

Reward Energy Efficiency by Middle Class Families. Massive increases in energy costs over the past year have left families reeling, and congressional Republicans responded by removing several provisions in a 2007 federal energy bill that would have incentivized energy efficiency in homes, including tax credits for purchasing energy efficient appliances, building energy-efficient homes, and installing energy efficient insulation. Kay believes these tax credits could significantly assist middle class Americans because they will encourage homeowners to save money on their escalating energy bills as well as minimize the impact of energy consumption on our environment. Kay will support a reauthorization of the energy efficiency appliance tax credit, which expired at the end of 2007, increase the residential energy efficiency property tax credit, and extend the tax credit for energy efficiency improvements to existing homes. Kay also believes that we must strengthen two federal programs that mitigate home energy cost burdens, the Low-Income Home Energy Assistance Program (LIHEAP), which provides assistance for home heating and cooling costs, and the Weatherization Assistance Program (WAP), which allocates funds to make homes inhabited by low-income Americans more energy efficient.

Help Families Stay in their Homes and Prevent Loss of Home Value. Kay does not support bailing out individuals who knowingly made poor financial decisions, but the current economic crisis has caused excessive strain on some people who were otherwise able to afford their homes. Furthermore, each foreclosure causes the value of surrounding homes to drop, regardless of an individual’s ability to afford his or her house. Kay will invest in helping families stay in their homes, reducing foreclosures, and finding innovative new ways to stabilize neighborhoods. She will seek public-private partnerships to renovate neighborhoods and turn foreclosed properties into affordable rental or ownership units. Kay also supports financial counseling to help working families regain control of their finances.

PROMOTE ENTREPRENEURSHIP AND INNOVATION

Small businesses are the lifeblood of North Carolina’s economy, and our entrepreneurial spirit has made America the most prosperous economy on earth. While this entrepreneurial spirit cannot be extinguished, economic policies that are tilted towards special interests and that under-invest in education, science, and research can make it much tougher for entrepreneurs to thrive. Kay will fight to prioritize research, to help small businesses get off the ground and grow, and to ensure that middle class Americans have the financial resources and knowledge they need to form their own companies.

Strengthen the Start-Up Tax Deduction. Kay is constantly amazed at the ingenuity middle class North Carolinians demonstrate in forming their own small businesses. She believes the federal government should provide further incentives for Americans to start their own business, which will help generate income for these individuals and will stimulate economic growth. As a U.S. senator, Kay will support legislation that increases the current tax deduction allowed for start-up costs of small businesses from $5,000 to $7,500. Enacting this increase will help potential small business owners meet the costs of incorporation, marketing, and rental expense that arise at the inception of a business.

Finance Loans for Small Businesses. Middle class entrepreneurs seeking to start their own businesses depend on seed money to launch their businesses. The Small Business Administration’s (SBA) 7(a) loan program, which allows banks to make specialized loans to small business owners that are guaranteed by the SBA, is an essential resource for entrepreneurs. Kay supports SBA reauthorization legislation that increases the maximum amount of 7(a) loans. She also believes that the SBA should evaluate the productivity of making loans to non-profit intermediaries, who, in turn, will make loans to start-up small businesses.

Help Businesses Save. Kay believes we should enhance tax-deferred savings vehicles, which would allow businesses to put money aside during good times and draw on those funds during periods of economic distress. Kay also believes we should simplify the tax code and remove red tape to make compliance easier, eliminating wasteful overhead costs for business. Finally, Kay recognizes that health care is an increasingly large burden for small businesses, and many small businesses cannot afford to provide health coverage for their employees. That is why, in addition to cutting health care costs throughout the system, Kay believes we need to help small businesses save on health care through tax credits for those who provide health insurance for their employees, and by allowing new options for buying insurance in pools.

Strengthen Innovation, Research and Development Tax Credits. Kay believes we need to support America’s entrepreneurial spirit by incentivizing businesses to create new products. She will increase the research and development tax credit, which the Bush Administration has consistently threatened to eliminate, and tax credits for companies that create jobs in the United States instead of sending them overseas. She will also restore funding for science and innovation through the National Science Foundation, the National Institutes of Health, and other research organizations.

Fight for Energy Independence. America’s ability to reduce its dependence on foreign oil is directly tied to the success of the middle class. An energy independent America will produce more green jobs, reduce energy costs for middle class families, and improve the quality of the environment in which we live. To lower the amount of carbon emissions in transportation, Kay supports increasing fuel efficiency standards and increasing investments in public transportation. We need to invest in new and existing fuel-efficient technologies, including hybrid and electric technologies. We also need to provide incentives for American auto manufacturers to build these cars and for individuals to purchase these vehicles.

Invest in American Success. Kay knows that, because the American middle class is the backbone of our economy, we must make investments in key areas that affect the middle class. She has proposed detailed plans to combat crime, ensure a solid educational foundation, provide access to affordable health care and make America more competitive in the global economy. She will pursue these priorities relentlessly in the U.S. Senate, so that middle class North Carolinians will thrive in our 21st Century economy.

LIFT THE DEBT BURDEN ON THE NEXT GENERATION

In light of the current economic crisis, Kay believes it is more important than ever to restore fiscal responsibility in the federal budget and also ensure that individuals are taking care of their own finances. We need to act now to prevent our children from being saddled with unbearable debt, whether caused by the federal government’s reckless binge borrowing, their own poor personal financial planning, or fraudulent lenders taking advantage of vulnerable populations. Kay has a strong record of demanding accountability and responsible budget practices as chair of the state Senate’s budget committee, and she will take the lessons she learned in the state to end the failed economic practices of the Bush-Cheney Administration.

Prioritize Financial Literacy. Kay believes that a major factor in the ability of families to compete in the 21st century economy is their ability to navigate the complex economic landscape that surrounds them. She recognizes that such learning must begin at an early age and continue throughout an individual’s development. Kay has been lauded for her sponsorship of several pieces of legislation in the state Senate that required the teaching of a financial literacy curriculum in state high schools. Kay will continue this commitment in the U.S. Senate by supporting legislation that authorizes grants to state educational agencies in order to promote the teaching of financial literacy. She will also support significant resources for the Financial Literacy and Education Commission to encourage higher education institutions to adopt effective financial education programs. By emphasizing financial literacy, Kay believes that students will receive both short-term and long-term benefits, giving individuals the skills to manage their personal finances, navigate complex college financial aid regimes, afford homes and understand their credit scores.

Reinstate Fiscal Responsibility. Federal budget deficits can have a significant impact on the household budgets of all Americans. The Federal Reserve has concluded that increased federal budget deficits cause interest rates to rise. In fact, the Federal Reserve states that for every additional one percent increase in the federal deficit as a share of the gross domestic product (GDP), interest rates will rise one-quarter of one percent. Under the Bush Administration, the federal deficit has climbed by four percentage points as a share of the GDP, meaning that interest rates are, on average, a full point higher. One group has calculated that this one percent increase in interest rates for home, car, student, and credit card debt can cost consumers $1,752 per year. Moreover, every North Carolina family pays an average of $1,867 in taxes each year just to pay the interest on the $9.6 trillion national debt. To reduce our ballooning budget deficit, Kay will slash wasteful spending, demand that Congress follow pay-as-you-go rules, and close tax loopholes for big, multinational corporations. We must also fight against wasteful federal contracts and explore ways to reduce our national debt, specifically our foreign-held debt. Restoring discipline to our fiscal policy will enable our monetary policymakers to lower interest rates, which, in turn, will reduce everyday costs for middle class Americans.

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