WASHINGTON >> Republican lawmakers are already signaling they will do what they can to block President Barack Obama’s pitch for tax increases on the wealthiest Americans.
Obama is making that pitch to a huge television audience in hopes of putting the new Republican Congress in the position of defending top income earners over the middle class.
As Obama continues to signal what he will propose during Tuesday’s State of the Union address, senior administration officials said during the weekend that he will call for raising the capital gains rate on top income earners and eliminating a tax break on inheritances. The revenue generated by those changes would fund new tax credits and other cost-saving measures for middle-class taxpayers, officials said.
Tax increases are rarely welcomed by congressional Republicans, who now hold majorities in the House and the Senate for the first time in Obama’s presidency. His tax proposals will probably be dismissed, if not outright ignored, by lawmakers outside the Democratic Party’s liberal base.
Rep. Adam Kinzinger, R-Ill., said that he had heard all five of Obama’s State of the Union addresses, which he said are filled with proposals both good and bad. But he said on ABC’s “This Week” that the president has fallen short by failing to establish close ties to Congress.
Key Republicans in both chambers indicated they would oppose the plan
“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,” Sen. Orrin Hatch, R-Utah, chairman of the Finance Committee, said in a weekend statement.
“More Washington tax hikes and spending is the same, old top-down approach we’ve come to expect from President Obama that hasn’t worked,” said Michael Steel, a spokesman for House Speaker John Boehner.
Obama aides were not surprised.
Said White House senior adviser Dan Pfeiffer: “Are they going to agree on everything? Absolutely not. I think we should have a debate in this country between middle-class economics and trickle-down economics and see if we can come to an agreement on the things we do agree on.” He spoke on CBS’s “Face the Nation
Administration officials disclosed details of the tax proposals on the condition of anonymity because they were not authorized to discuss the proposals by name before the president’s speech.
The centerpiece of the president’s tax proposal is an increase in the capital gains rate on couples making more than $500,000 per year to 28 percent, the same level as under President Ronald Reagan. The top capital gains rate has already been raised from 15 percent to 23.8 percent during Obama’s presidency.
Obama also wants to close what the administration is calling the “trust fund loophole,” a change that would require estates to pay capital gains taxes on securities at the time they’re inherited. Officials said the overwhelming impact of the change would be on the top 1 percent of income earners.
Administration officials pointed to a third proposal from the president as one they hope Republicans would support: a fee on the roughly 100 U.S. financial firms with assets of more than $50 billion.
Raising the capital gains rate, ending the inheritance loophole and tacking a fee on financial firms would generate $320 billion in revenue over a decade, according to administration estimates. Obama wants to put the bulk of that money into a series of measures aimed at helping middle-class Americans.
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The White House says President Barack Obama will propose in his State of the Union address a plan to impose higher taxes on the wealthy and use the revenue to help middle-class families. Congress would have to agree, and lawmakers have rebuffed Obama’s earlier proposals to eliminate certain tax provisions and spend the money on road and bridge repair, for example.
OBAMA’S TAX PROPOSALS
–Eliminate a tax break on inheritances. The White House says the tax break costs the government hundreds of billions of dollars in annual tax revenue.
–Increase the total top capital gains rate on couples with incomes above $500,000 to 28 percent, what it was under President Ronald Reagan. The top capital gains rate has already been raised from 15 percent to 23.8 percent during Obama’s presidency.
–Impose a fee on big financial firms, those with assets of more than $50 billion. The White House said the idea is in line with a proposal that was in a comprehensive tax overhaul plan brought forward during the previous session of Congress by then-Rep. David Camp, R-Mich.
Raising the capital gains rate, ending the break on inheritances and imposing a fee on financial firms would generate $320 billion in revenue over a decade, according to administration estimates.
HOW OBAMA WOULD SPEND THE MONEY
–A new $500 “second earner” tax credit for families in which both spouses work. An estimated 24 million couples would benefit; the credit would apply to families with annual income up to $210,000.
–Expand the child care tax credit to as much as $3,000 per child under age 5. The administration says the proposal would help more than 5 million families pay for child care.
–Consolidate six overlapping education tax breaks into two. Republicans have been open to the idea of streamlining education tax breaks.
–Expand the Earned Income Tax Credit to workers without children and to noncustodial parents.
–Boost retirement savings by automatically enrolling in an Individual Retirement Account people who don’t have access to a workplace retirement plan, and expand access to employer retirement plans for certain part-time workers.