President Barack Obama will propose a massive tax plan at his State of the Union Tuesday, offering relief for middle class Americans financed by higher taxes and fees on the wealthy and big banks.
The president intends to sketch out a web of $175 billion worth of tax credits for the middle class while also bringing in an additional $320 billion by raising taxes on capital gains and other areas that hit the richest Americans and Wall Street.
Part of the plan will target capital gains: first raising the tax rate on capital gains to 28% from 23.8%, and also making tax on inherited investments based on the original price rather than the value at time of inheritance. According to the White House, this would largely hit the very wealthiest of Americans: 99% of tax paid under this plan would be paid by the top 1%, and 80% of that would be from the top 0.1%.
The plan would also include a 0.07% fee increase on about 100 large financial firms with assets of at least $50 billion, echoing a proposal by retired Republican Rep. Dave Camp last year.
The funds raised through these additional taxes would allow for a series of tax credits intended to help boost a middle class that has seen wages stagnate despite a healthier economy overall. A $500 "second-earner" credit would be available to families making up to $120,000, with smaller amounts available to those making combined incomes of up to $210,000. Obama's tax plan would also increase the value of child tax credits threefold to $3,000 and open it to families with incomes up to $120,000.
Some money raised under this plan would also go to streamlining and extending existing educational credits, as well as to fund a recently-announced proposal to provide two years of community college free.
But despite some agreement between the parties on many of these measures, the proposal received sharp criticism from Republicans opposed to any tax increases.
“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,” Sen. Orrin Hatch (R-Utah), chairman of the Finance Committee, said in a statement. “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.”
A spokesman for House Ways and Means Committee Chairman Paul Ryan (R-Wis.) also pushed back against the president's ideas.
"This is not a serious proposal," Brendan Buck said in a statement. "We lift families up and grow the economy with a simpler, flatter tax code, not big tax increases to pay for more Washington spending."
Given that level of opposition, Obama’s tax plan is unlikely to survive intact.