On Saturday, White House officials announced that President Obama’s upcoming State of the Union address will include a plan to increase tax credits for the middle class, with $320 billion in revenue obtained by increasing taxes on the wealthy over the next ten years.
Americans for Tax Reform reported that Obama’s budget will include five major tax increases: a capital gains rate hike, an increase in the death tax rate, an increased tax on banks, a tax increase on families saving for college, and a tax increase in retirement plans.
According to the Associated Press, the capital gains rate hike would “increase the total top capital gains rate on couples with incomes above $500,000 to 28 percent,” which has “already been raised from 15 percent to 23.8 percent” during Obama’s presidency.
Obama’s changes in the death tax rate would eliminate a tax break on inheritances, where individuals pay both income and estate taxes on the same dollars. This would close a “loophole” that Obama has suggested is a “huge scam that wealthy people exploit,” according to Forbes.
The Guardian reported that Obama’s proposed “Bank Tax” will put a new 0.07% tax on the liabilities of U.S. financial firms with assets of more than $50 billion, “making it more costly for them to borrow heavily.”
Obama’s plan also includes increased taxes on families saving for college. While the current law lets money put in 529 plans, or college savings accounts, grow tax-free, Obama’s proposal would require that earnings “face taxation upon withdrawal, even if the withdrawal is to pay for college,” according to Americans for Tax Reform.
Politico reported that Obama plans to increase taxes on retirement plans such as the IRA and 401(k), by capping the amount an individual can accumulate in the account at $3.4 million, giving retirees a limit of $210,000 in annual income.
Once accumulating the money from the wealthy, the Associated Press reported that Obama plans to give a “new $500 ‘second earner’ tax credit for families where both spouses work,” and an expanded child care tax credit of up to “$3,000 per child under age 5.”
According to Politico, Obama also plans to “expand tax breaks for small businesses that automatically enroll their employees in retirement savings accounts.”
NPR reported that Obama’s plans have been met with criticism from Republicans in Congress, such as a spokesperson for Representative Paul Ryan who said that the plan was “not a serious proposal.”
The Senate’s top tax law writer, Senator Orrin Hatch, told Reuters that Obama “needs to stop listening to his liberal allies who want to raise taxes at all costs and start working with Congress to fix our broken tax code.“