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Obama to call for tax hikes on wealthy

January 18, 2015

US President Barack Obama will use his State of the Union address on Tuesday to propose closing tax loopholes exploited by the richest Americans, officials say. It will be his first address to a Republican-led Congress.

US President Barack Obama answers media questions with British Prime Minister David Cameron (not pictured) at their joint press conference following their meeting at the White House in Washington January 16, 2015. REUTERS/Kevin Lamarque
Image: Reuters

Tax raises for the wealthy were among a list of proposals to be made in Obama's State of the Union address, senior administration officials said on Saturday.

Others proposals announced over the past weeks include calls for lawmakers to make community college free for many students, increased paid leave for workers and new laws on cybersecurity after recent high-profile hacking attacks on companies and the federal government.

The president's tax proposals will center on increasing the capital gains rate on couples earning more than $500,000 (432,488 euros) to 28 percent. The rate has already been raised from 15 percent to 23.8 percent during Obama's time in office.

The 28-percent rate was already seen during the 1980s Republican presidency of Ronald Reagan.

Benefits for middle class

Obama will also propose making it mandatory for estates to pay capital gains taxes on securites at the time that they are inherited, and imposing a fee on US financial firms with assets of more than $50 billion, thus making it more expensive for them to borrow heavily.

The administration estimates that the three proposed measures would generate $320 billion in revenue over a decade - money that Obama wants to largely use to implement measures aimed at helping middle-class Americans.

Such measures include a $500 credit for families with two working spouses and raising the tax credit for child care to $3,000 per child - three times the current level.

Uphill battle

The tax suggestions in particular are likely to meet with resistance from opposition Republicans, with most members of the party wanting to lower or get rid of the capital gains tax and to end taxes on estates. As Republicans now control both chambers of Congress after large gains in November midterm elections, Obama, a Democrat, will face a difficult challenge turning the proposals into law.

Adminstration officials say, however, that they remain optimistic about gaining some bipartisan support.

The annual State of the Union address is the most important in the US political calendar. Tuesday's speech comes two years to the day ahead of Obama's scheduled departure from office in 2017.

Observers say the speech is also likely to include comments on the normalization of ties with communist Cuba, a move Obama announced in December. Opinion polls say a majority of Americans support the step.

tj/ksb (AFP, Reuters, AP)