At a meeting of the White House's Task Force on Middle Class Families, President Obama and Vice President Joe Biden announced their support for a near doubling of the child- and dependent-care tax credit for families that make less than $85,000 a year. The tax credit rate would be boosted to 35% from 20% of qualifying expenses.
Faced with continuing double-digit unemployment and public unease over his handling of the economy, President Obama is expected to zero in on economic issues during Wednesday's State of the Union and ahead of November's midterm congressional elections.
"We are fighting every single day to put Americans back to work, create good jobs, and strengthen our economy for the long-term," President Obama said in a statement. "The additional steps laid out today focus on easing the burdens on middle class families who are struggling in this economy, and providing the help they need to get ahead."
Under its proposal, the White House says all eligible families making under $115,000 a year would see a bigger dependent-care tax credit. Families could claim up to $3,000 in expenses for one child or $6,000 for two children. Families making less than $80,000 annually could claim a maximum credit of $2,100, up $900 from current law.
On Monday, President Obama also proposed limiting a student's federal loan payments to 10% of his or her income above a basic living allowance, requiring all employers to give employees the option of enrolling in a direct-deposit IRA, expanding tax credits to match retirement savings, and adding $52.5 million to a program that helps families care for aging relatives.
It's unclear how much the series of initiatives would add to the federal deficit, which is expected to top $1.5 trillion this fiscal year. President Obama, who has endorsed a bipartisan Congressional panel to address fiscal issues, is expected to address deficit fears in the State of the Union speech.
Under the administration's student-loan proposals, remaining debt would be forgiven after 10 years of payments for those in public-service work and 20 years for others. The White House said the monthly payment for a single borrower earning $30,000 who owes $20,000 in loans would be $115 a month, compared to $228 a month under the standard 10-year repayment plan.
"Every day, middle-class families go to work and help make this country great," Mr. Biden said. "For a year, our Task Force has been hearing that they are struggling with soaring costs and squeezed family budgets. These common-sense initiatives will help these families cope with these challenges."