Administration looks to responsibly invest in middle class families Excerpted from the White House Briefing Room, January 17, 2015.
Middle class families today bear too much of the tax burden because of unfair loopholes that are only available to the wealthy and big corporations. In his State of the Union address, the President will outline his plan to simplify our complex tax code for individuals, make it fairer by eliminating some of the biggest loopholes, and use the savings to responsibly pay for the investments we need to help middle class families get ahead and grow the economy.
The President will put forward reforms that include eliminating the biggest loophole that lets the wealthiest avoid paying their fair share of taxes:
- Close the trust fund loophole
– the single largest capital gains tax loophole – to ensure the wealthiest Americans pay their fair share on inherited assets. Hundreds of billions of dollars escape capital gains taxation each year because of the “stepped-up” basis loophole that lets the wealthy pass appreciated assets onto their heirs tax-free.
- Raise the top capital gains and dividend rate back to the rate under President Reagan
The President’s plan would increase the total capital gains and dividends rates for high-income households to 28 percent.
- Reform financial sector taxation
-to make it more costly for the biggest financial firms to finance their activities with excessive borrowing. The President will propose a fee on large, highly-leveraged financial institutions to discourage excessive borrowing.
By ensuring those at the top pay their fair share in taxes, the President’s plan responsibly pays for investments we need to help middle class families get ahead, like his recent proposal to make two years of community college free for every student willing to do the work.
The savings will pay for additional reforms that will help the paychecks of middle-class and working families go further to cover the cost of child care, college, and a secure retirement:
- Provide a new, simple tax credit to two-earner families
The President will propose a new $500 second earner credit to help cover the additional costs faced by families in which both spouses work — benefiting 24 million couples.
- Streamline child care tax incentives
-to give middle-class families with young children a tax cut of up to $3,000 per child. The President’s proposal would streamline and dramatically expand child care tax benefits, helping 5.1 million families cover child care costs for 6.7 million children. The proposal will complement major new investments in the President’s Budget to improve child care quality, access, and affordability for working families.
- Simplify, consolidate, and expand education tax benefits
-to improve college affordability. The President’s plan will consolidate six overlapping education provisions into just two, while improving the American Opportunity Tax Credit to provide more students up to $2,500 each year over five years as they work toward a college degree – cutting taxes for 8.5 million families and students and simplifying taxes for the more than 25 million families and students that claim education tax benefits.
- Make it easy and automatic for workers to save for retirement
The President will put forward a retirement tax reform plan that gives 30 million additional workers the opportunity to easily save for retirement through their employer.
These new policies build on longstanding proposals to extend important tax credit improvements for working families, expand the Earned Income Tax Credit, provide quality preschool for all four-year-olds, and raise revenue to reduce the deficit by curbing inefficient tax breaks that primarily benefit the wealthy. In addition, the President has put forward a framework for fixing the business tax system on a revenue- neutral basis and using the transition revenue to pay for investments in infrastructure.
Read more from the White House briefing room.