White House Unveils Tax Proposals Aimed at Middle Class (article)

White House Unveils Tax Proposals Aimed at Middle Class (article)

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In a preview of President Obama's State of the Union Address last night, the White House on January 17 unveiled a $175-billion set of tax cuts aimed at boosting the middle class, paid for by the top 1 percent of taxpayers. Central to his proposals is a simplification of the tax code and eliminating some of the biggest tax breaks used by the wealthy, with the revenue going to pay for middle-class tax breaks.  The president's plan would raise $320 billion over the next 10 years.

Specifically, the administration has proposed raising the total top capital gains and dividends rate to 28 percent, up from 23.8 percent, for couples with incomes above $500,000 annually, and changing the treatment of what has been termed the "trust fund loophole." Under the administration's proposal, there would be a change in the tax treatment of the appreciated value of inherited assets. Those assets, which are currently not taxed, would be taxed based on their value when purchased, allowing for the imposition of a tax on assets when distributed. The plan also calls for imposing a fee on borrowing by the largest financial firms, those with assets over $50 million, making it costly for them to borrow heavily.

The proposals, which seem unlikely to be supported by Republicans, appear intended to set the tone for the remainder of Obama's tenure in the White House, casting Republicans into the role of supporting the wealthy at the expense of the middle class.

"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," said Senate Finance Committee Chairman Orrin G. Hatch, R-Utah. "The President 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."

Speaking on CNN's "State of the Union" on January 18, Rep. Jason Chaffetz, R-Utah, called the administration's new plan "a nonstarter." "Are you going to actually grow the economy and jobs, are entrepreneurs going to be better off, are small businessmen going to be better off, with more taxes and more government? No!"

Dan Pfeiffer, a senior Obama advisor, defended the President's proposals, saying the administration has put forward a series of investments "potentially for the middle class, paid for by a simple idea: the wealthy, the largest financial institution and corporations can pay a little more." Speaking on NBC's "Meet the Press," Pfeiffer said that some of the administration's ideas have Republican support. "The fee on financial institutions is an idea very similar to one in Republican congressman Dave Camp's tax plan last year," he said. "So we're going to make a case for it and we're going to see what we can do. And if Republicans want to oppose closing the trust fund loophole let them make their case to the country."

Details

The President also laid out a new $500 second earner credit to help cover the additional costs faced by families where both spouses work. In addition, Obama proposed tripling the child care tax credit, providing up to $3,000 per child under five, which would allow 5.1-million families cover child care costs. The President's plan also reforms the education tax system by consolidating six overlapping education provisions into just two and improving the American Opportunity Tax Credit by providing students up to $2,500 a year toward completing a college degree.

The President's proposal would also boost access to pre-tax retirement accounts by requiring most employers that do not offer savings plans, to automatically enroll their workers in an IRA. According to a White House fact sheet, the President's plan cuts taxes for 8.5-million families and students and simplifies taxes for the more than 25-million families and students that claim education tax benefits.

"The President's tax proposals focus right where we need to—creating opportunity for middle class families and those struggling to join the middle class," said House Ways and Means ranking member Sander Levin, D-Mich., in a prepared statement. "By seeking to address economic inefficiencies including in our capital gains structure and targeting these revenues toward investment in education and support for working parents, the President's proposals would address the key issue of wage stagnation for most families and strengthen our nation's road to recovery."


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White House Unveils Tax Proposals Aimed at Middle Class (article)In a preview of President Obama's State of the Union Address last night, the White House on January 17 unveiled a $175-billion set of tax cuts aimed at boosting the middle class, paid for by the top 1 percent of taxpayers....2015-01-21T12:44:00-05:00

In a preview of President Obama's State of the Union Address last night, the White House on January 17 unveiled a $175-billion set of tax cuts aimed at boosting the middle class, paid for by the top 1 percent of taxpayers.