The proposal faces long odds in the Republican-controlled Congress, led by lawmakers who have long opposed raising taxes and who argue that doing so would hamper economic growth at a time the country cannot afford it.
But the decision to present the plan during Tuesday’s speech marks the start of a debate over taxes and the economy that will shape both Mr. Obama’s legacy and the 2016 presidential campaign.
It is also the latest indication that the president, untethered from political constraints after the midterm losses, is moving aggressively to set the terms of that discussion, even as he pushes audacious moves in other areas, like immigration and relations with Cuba.
The president’s plan would raise $320 billion over the next decade, while adding new provisions cutting taxes by $175 billion over the same period. The revenue generated would also cover an initiative Mr. Obama announced this month, offering some students two years of tuition-free community college, which the White House has said would cost $60 billion over 10 years.
The centerpiece of the plan, described by administration officials on the condition of anonymity in advance of the president’s speech, would eliminate what Mr. Obama’s advisers call the “trust-fund loophole,” a provision governing inherited assets that shields hundreds of billions of dollars in inherited assets from taxation each year. The plan would also increase the top capital-gains tax rate, to 28 percent from from 15 percent, for couples with incomes above $500,000 annually.
Those changes and a new fee on banks with assets over $50 billion would be used to finance a set of tax breaks for middle-income earners, including a $500 credit for families in which both spouses work; increased child care and education credits; and incentives to save for retirement.
The initiative signals a turnabout for Mr. Obama, who has spoken repeatedly about the potential for a deal with Republicans on business tax reform but little about individual taxation, an area fraught with partisan disagreements.
The proposal includes some elements that have previously drawn support from both Republicans and Democrats, including education and retirement savings proposals and the secondary earner credit. A tax on large banks was part of a plan proposed last year by former Representative Dave Camp, a Michigan Republican, who retired as chairman of the Ways and Means Committee.
Mr. Obama’s advisers characterized the plan as the next phase in the president’s economic message, which he has been promoting over the past two weeks with trips highlighting the nation’s financial rebound. During the tour, Mr. Obama has pitched a range of initiatives to help the middle class, including free community college and paid leave. Both Democrats and Republicans see middle-class voters as an important bloc for winning the White House in 2016.
The bulk of the financing for the plan — $210 billion — would come from a capital-gains tax hike and a change in the way the tax code treats the appreciated value of inherited assets. Under the proposal, inherited assets would be taxed according to their value when they were purchased. That means the capital gains on those assets during a person’s lifetime, now shielded from taxation, would be subject to tax at the time of the bequest.
The proposal, which does not apply to charitable gifts, would fall almost entirely on the top 1 percent of taxpayers, administration officials said. It would apply to capital gains of $200,000 or more per couple, with an additional $500,000 exemption for personal residences.
The remaining $110 billion to pay for Mr. Obama’s new tax proposals would be generated by a fee imposed on the largest and most highly leveraged financial firms. That proposal, administration officials said, was designed to make “risky activity” more costly for the roughly 100 such companies in the nation with assets more than $50 billion. Those companies would be assessed a fee based on the amount of debt they hold.
White House officials estimated that the new $500 “second-earner” tax credit would benefit 24 million households. The maximum credit would go to those earning up to $120,000, and some credit would be available to those earning up to $210,000.
Mr. Obama also wants to triple the child care tax credit, currently an average of $550, and make it easier for middle-income earners to qualify, offering up to $3,000 for each child under the age of 5. White House officials said the plan would eliminate existing tax-advantaged flexible spending accounts for child care and reinvest those resources in the tax credit.
In addition, the president is proposing to streamline a jumble of educational tax credits and give students up to $2,500 annually toward earning a college degree. Students who attend school less than half the time would also qualify for the first time, and more of the credit, $1,500, would be available regardless of whether an individual owed any taxes.
The president’s proposal would also increase access to tax-advantaged retirement savings plans by requiring most employers that do not offer such plans to automatically enroll their workers in an IRA. New tax credits would be available to businesses that ensure their workers can save for retirement, officials said.
Mr. Obama has failed to find common ground with Republicans on fiscal matters, including during several attempts to strike a “grand bargain” on the budget. The Treasury Department proposed a detailed corporate tax overhaul plan in 2012 that would have lowered the rate to 28 percent from 35 percent and given multinational corporations a one-time “tax holiday” to return billions of dollars in profits parked overseas, steering that revenue toward infrastructure spending. But it went nowhere in the last Congress.
It is not clear that this effort would fare any better.
Culled from NY Times
No comments:
Post a Comment