Barack Obama goes after the "one per cent" with proposed $320 billion tax hike
Source: telegraph.co.uk
US president will use Tuesday's State of the Union address to "play offence" and introduce tax measures aimed at the wealthy and banksb
President Barack Obama will use his annual State of the Union address to propose hundreds of billions of dollars in tax hikes on America's "one per cent" in a move that will increase tensions with the Republican-dominated Congress.
Mr 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, which he calculates would together raise $320 billion over the next decade.
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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 one per cent of earners. Some Republicans immediately called the proposals a "non-starter".
The most important speech in the US political calendar comes two years before Mr Obama's scheduled departure from the White House and he has vowed to spend that time "playing offence".
But with Republicans controlling both chambers of Congress after midterm election victories in November, he will struggle to turn his proposals into legislation.
It is the first time since his election in 2008 that he 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 publicly to defend the wealthy.
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 is the vision that he has for how we finish that job."
Under Mr 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.
Mr Obama also wants to close the so-called "trust fund loophole," meaning capital gains taxes on securities 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 Mr 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.
The president is also expected to call for community colleges to be made free for many students – at a cost of $60 billion.
His proposal will outline spending of $175 billion to benefit the middle class, including increases in paid leave for workers.
There would be a credit of up to $500 for families in which both parents work, and the tax credit for child care would be expanded up to $3,000 for each child under five.
Administration officials said they believed there was room for a "bipartisan" way forward on the proposals.
But Republicans, who want to lower or abolish capital gains tax, immediately criticised them.
Senator Orrin Hatch, Republican chairman of the Senate Finance Committee, said: "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.
"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."
A spokesman for former Republican vice presidential nominee Paul Ryan, said: "This is not a serious proposal. We lift families up and grow the economy with a simpler, flatter tax code, not big tax increases to pay for more Washington spending."
Source: telegraph.co.uk
