Obama to announce tax hike for rich
‘The middle class has yet to experience the prosperity shown in the recovery, and what will be new on Tuesday night is the vision that he has for how we finish that job.’
PRESIDENT Barack Obama will use his annual State of the Union address to propose hundreds of billions of dollars in tax rises on America’s ‘‘one per cent’’ in a move that will increase tensions with the Republican-dominated Congress.
Obama will call for raising the capital gains rate on high earners, the elimination of a tax break on inheritances and the implementation of a fee on large financial firms lending and borrowing money. He calculates that, together, they would raise US$320 billion over the next decade.
The president will propose using the money to benefit middle class working families and extend education programmes.
An Obama administration official said 99 per cent of the effects of the proposed tax increases would hit the highest 1 per cent of earners. Some Republicans im- mediately called ‘‘non-starter’’.
The most important speech in the US political calendar comes two years before Obama’s scheduled departure from the White House and he has promised to spend that time ‘‘playing offence’’. But with Republicans controlling
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Administration official both chambers of Congress after mid-term election victories in November, he will struggle to turn his proposals into legislation.
It is the first time since his election in 2008 that Obama will be delivering the State of the Union to a Congress in which both houses are entirely controlled by his Republican adversaries.
However, the huge television audience – 33 million watched the State of the Union last year – will allow him to put Republicans in the position of having to defend the wealthy publicly.
One Obama administration official said: ‘‘The middle class has yet to experience the prosperity shown in the recovery, and what will be new on Tuesday night [tomorrow NZ time] is the vision that he has for how we finish that job.’’
Under Obama’s proposals the capital gains rate on couples making more than $500,000 per year would rise to 28 per cent. He has previously raised it from 15 per cent to 23.8 per cent. His officials noted that it was 28 per cent during the Republican presidency of Ronald Reagan in the 1980s.
Obama also wants to close the so-called ‘‘trust fund loophole’’, meaning capital gains taxes on se- curities would have to be paid at the time they are inherited. An administration official called it the ‘‘single biggest loophole in our tax system today’’.
Of the $320 billion total Obama proposes to raise, $110 billion would come from a fee on about 100 US financial firms with assets of more than $50 billion. The fee would make it more costly for them to engage in high-risk lending and borrowing and mean extra burdens on Wall Street banks. His proposal will outline spending of $175 billion to benefit the middle class, including increases in paid leave for workers.
Orrin Hatch, Republican chairman of the Senate finance committee, said: ‘‘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.’’