President Obama plans to use his State of the Union speech to target tax loopholes that benefit the wealthy, while offering new tax breaks for middle-class items like child care, White House officials said Saturday.
In the prime-time address Tuesday, the president plans to call for ending certain loopholes on trust funds, increasing the top tax rates on dividends and capital gains, and imposing new fees on big financial firms that borrow heavily.
Obama also plans to propose new tax breaks for families that have a second working member, child care and the costs of college education, according to a White House proposal.
He will propose a requirement for businesses that do not have a retirement plan to automatically enroll employees into individual retirement accounts.
The package is designed “to simplify our complex tax code, make it fairer by eliminating some of the biggest loopholes, and use the savings to responsibly pay for the investments we need to help middle-class families get ahead and grow the economy,” says a White House statement.
In unveiling a plan to be discussed at the State of the Union, the Obama administration said that closing loopholes for the wealthy would generate revenue of $320 billion over 10 years; the new tax breaks that Obama plans to propose would cost $235 billion over 10 years.
The $235 billion includes both the new tax breaks and the president’s proposal to make community college free for responsible students, which he laid out last week.
Republicans who control both the U.S. House and Senate have objected to what they call tax hikes and excessive business regulations proposed by the Obama administration, saying they would slow business activity.
House Speaker John Boehner, R-Ohio, said this week that Obama has practiced “the old politics of pitting, you know, one set of Americans against the other, on the outdated ways of bureaucratic control, all top-down Washington solutions.”
Republican leaders have also said they would work with Obama on simplifying the tax code, one of the goals of the president’s package.
Senate Majority Leader Mitch McConnell, R-Ky., has said that one goal of tax reform should be reducing the corporate tax reform, helping U.S. businesses become more competitive globally. McConnell said this week that the problem with past Obama plans is that “you leave out most of American business.”
An administration statement said that “hundreds of billions of dollars” in inherited assets that are part of trust funds escape taxation every year, and called for the elimination of this “trust fund loophole.”
Another proposal is to increase the top rates on long-term capital gains and dividends from 23.8% to 28% on the highest income households, the level they were at during the Reagan administration.
The proposed fee on financial firms would discourage them from over-borrowing, one of the things that led to the financial meltdown, the White House said. It said the fee could be applied to some 100 firms that have assets of more than $50 billion.
Some of the revenue from these loophole closings would be used for tax breaks designed to “reinvest in the middle class,” said the White House statement.
They include a proposed $500 “second earner” tax credit for families in which both spouses work.
Another State of the Union plank would triple the maximum child care tax credit, providing up to $3,000 per child under the age of 5.
The White House said Obama wants to consolidate six college aid programs into two, helping provide students up to $2,500 in assistance.
A proposed requirement that workers be enrolled in some kind of retirement savings plan would apply to employers who have more than 10 employees.
Obama and aides have spent the past two weeks promoting other items he plans to discuss Tuesday, including proposals on housing, manufacturing, community college, cybersecurity and paid leave.
In his Saturday radio address, Obama previewed some of the people who will sit in the presidential box during the speech.
They include a woman who expanded her business through a federal loan, a wounded warrior who fought in Afghanistan and a man who is repaying his student loans and obtained health insurance through federal programs.
Obama told the radio audience that his State of the Union Address will emphasize economic recovery and “how to build on our momentum” through rising incomes and a stronger middle class.
“And I’ll call on this new Congress to join me in putting aside the political games and finding areas where we agree so we can deliver for the American people,” Obama said.
The White House has announced Obama’s travel in the days after Tuesday’s speech. The president will speak Wednesday at Boise State University in Idaho, and Thursday at the University of Kansas in Lawrence.
Source: USA Today