In his State of the Union speech Tuesday, President Obama will call for tax increases on the wealthy to pay for tax breaks to the middle class. The president's tax hike on the wealthy would generate $320 billion over 10 years.
According to the Associated Press, the centerpiece of Obama's tax proposal is to increase the capital gains tax rate from 23.8 percent to 28 percent on couples earning more than $500,000. During Obama's presidency, the capital gains tax has already risen from 15 percent to 23.8 percent.
In his speech, the president will call for closing what is called the trust fund loophole, which, White House officials says, allows estates to evade paying taxes when passed on to heirs, reports ABC News. Obama will also seek to charge new fees on financial institutions with over $50 billion in assets.
The tax hikes the president will call for in Tuesday's State of the Union, he says, will all pay for the benefits he wants to extend to the middle class. These benefits, the president maintains, will put more money in middle-class taxpayers' pockets through the tax credits he will put forth.
- A tax credit of $500 for families in which both spouses work, which would apply to couples making up to $210,000
- Expanded Child Care Tax Credit up to $3,000 per child under 5-years-old
- Doubled Earned Income Tax Credit for workers without children and noncustodial parents
- A $2,500 per year tax incentive for up to five years (not four) for students getting a college degree
The president's plan, officials tell ABC News, will generate revenue of $320 billion over a decade.
With Republicans controlling both Houses of Congress, the president is likely to face staunch opposition to his tax proposal, according to a statement made by Senate Finance Committee Chairman Orrin G. Hatch to BBC News.
"Slapping American small businesses, savers, and investors with more tax hikes only negates the benefits of the tax policies that have been successful in helping to expand the economy, promote savings, and create jobs."
Reuters reports President Obama, in his State of the Union address, will also call on Congress to pass the Healthy Families Act, a plan that allows workers to earn up to seven days a year of paid sick leave. Obama will also speak about his two-year free community college proposal, a plan that will cost American taxpayers $60 billion.