Mon, Jan 19, 2015 page15

• Obama tax plan to aid middle class

  CHANGING INHERITANCE: The US president plans to impose capital-gains taxes on asset transfers at death, which currently provides incentive for the rich to accrue assets

  • Bloomberg
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  US President Barack Obama is proposing new taxes on the wealthiest Americans that would limit their profits from investments and make it harder for them to pass assets to heirs.

  Obama, who will promote the plan during his State of the Union Address tomorrow, will use much of the proceeds — US$320 billion over 10 years — to expand tax credits for higher education and childcare and create a new break for two-earner couples. The White House released details of the plan on Saturday.

  “What you’re seeing here is really dedicated middle-class tax relief to really get at that problem of middle-class wage stagnation,” said Harry Stein, director of fiscal policy at the Center for American Progress, a Washington group aligned with Democrats.

  Obama’s tax plan faces opposition in the Republican-controlled US Congress, where lawmakers want to cut tax rates and curtail targeted breaks. The two parties agree more on business tax changes, though an accord on that is not close.

  “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,” Republican Orrin Hatch, the chairman of the US Senate Finance Committee, said in a statement on Saturday. “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.”

  Obama’s address is intended to lay out an agenda for his final two years in office and help the Democratic Party retain the White House in next year’s election with a legacy of policies that appeal to middle and lower-income voters, who continued to lose ground as the economy rebounded from the recession.

  He would increase the top tax rate on capital gains and dividends to 28 percent from 23.8 percent. The rate was 15 percent when he took office in 2009, meaning that he is proposing to almost double it over his two terms in office.

  He would also impose capital-gains taxes on asset transfers at death, ending what the White House calls “the largest capital gains loophole.” Under current law, assets held until death are not subject to those levies, creating an incentive for wealthy people to hold onto them. Heirs only have to pay capital-gains taxes when they sell, and only on the value above what the assets were worth at death.

  Obama has been previewing his proposals over the past 10 days in speeches around the country. In addition to the tax plan, he said he will push Congress for legislation allowing workers to earn seven days of paid sick leave per year and make community college free for millions of students, at a cost of US$60 billion over 10 years.

  Obama, who has consistently advocated for tax increases on the wealthy and tax cuts for middle-income families, is offering more of both in the tax plan released on Saturday. He is layering new proposals on top of others that Congress has ignored or rejected.

  Spokesmen for US House Speaker John Boehner and Senate Majority Leader Mitch McConnell both criticized the plan.
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