Obama speech to call for closing tax loopholes
President Barack Obama's State of the Union address will propose closing multibillion-dollar tax loopholes used by the wealthiest Americans, imposing a fee on big financial firms and then using the revenue to benefit the middle class, senior administration officials said on Saturday.
Obama's annual address to a joint session of Congress on Tuesday night will continue his theme of income equality, and the administration is optimistic it will find some bipartisan support in the Republican-dominated House of Representatives and Senate.
The proposals administration officials listed on Saturday may still generate significant opposition from the Republicans because they would increase taxes.
In a conference call with reporters to preview the taxation aspect of Obama's address, one official said some of the ideas the president is outlining already have "clear congressional bipartisan support or are ideas that are actually bipartisan in their nature."
Obama's proposals call for reforming tax rules on trust funds, which the administration called "the single largest capital gains tax loophole" because it allows assets to be passed down untaxed to heirs of the richest Americans.
They also would raise the capital gains and dividends rates to 28 percent, the level during the 1980s Republican presidency of Ronald Reagan.
As a way of managing financial risk that could threaten the U.S. economy, Obama also wants to impose a fee of seven basis points on the liabilities of U.S. financial firms with assets of more than $50 billion, making it more costly for them to borrow heavily.
The changes on trust funds and capital gains, along with the fee on financial firms, would generate about $320 billion over 10 years, which would more than pay for benefits Obama wants to provide for the middle class, the official said.
The benefits mentioned on Saturday would include a $500 credit for families with two working spouses, tripling the tax credit for child care to $3,000 per child, consolidating education tax incentives and making it easier for workers to save automatically for retirement if their employer does not offer a plan.
The price tag on those benefits, plus a plan for free tuition at community colleges that Obama announced last week, would be about $235 billion, the official said. Specifics on the figures will be included in the budget Obama will send to Congress on Feb. 2.
"We're proposing more than enough to offset the new incremental costs of our proposals without increasing the deficit," the administration official said.
The State of the Union address is the president's annual chance to lay out his plans. With Republicans controlling both chambers of Congress after big wins in midterm elections in November, Obama, a Democrat, faces an uphill task turning much of his vision into legislation.