WASHINGTON — President Barack Obama plans to propose raising $320 billion over the next 10 years in new taxes targeting wealthy individuals and big financial institutions to pay for new programs designed to help lower- and middle-income families, senior administration officials said Saturday.
In his State of the Union address Tuesday night, Obama will propose raising the capital gains and dividend tax rates to 28 percent for high earners; imposing a fee on the liabilities of about 100 big financial institutions; and greatly broadening the amount of inherited money subject to taxes.
Obama will also seek to boost private retirement savings by requiring employers without 401(k) plans to make it easier for full-time and part-time workers to save in individual retirement accounts, which could assist as many as 30 million people. The administration would provide small employers tax credits to cover costs.
Senior administration officials said the package would highlight the president’s desire to boost taxes on wealthy households and help lower- and middle-class families. New tax credits would help those in need of child care and households with two earners, they said, while other proposals — such as covering community college tuition — would help students.
The moves would “eliminate the biggest tax loopholes and use the savings to let the middle class get ahead,” said one of the senior administration officials who spoke on the condition of anonymity during a conference call with reporters to describe the plan before the president’s speech.
This person added that 99 percent of the impact of the tax increases would fall on the top 1 percent of earners.
The ambitious — and controversial — proposals demonstrate the White House’s increasing confidence about the trajectory of the U.S. economy. For the past year and a half, it has debated how much it could trumpet the recovery when so many Americans have not felt any change in their own outlook.
The plan is likely to draw fire from Republicans and possibly some Democrats, who have in the past increased the amount of money exempt from inheritance taxes they branded “death taxes.” Most Republicans have long opposed increases in capital gains rates, and many favor eliminating the tax altogether.
The administration tried to head off some of that attack by asserting that elements of the package resembled proposals endorsed by Republicans. Officials also said that the capital gains tax rate was 28 percent during President Ronald Reagan’s terms in office.
The administration would also seek to limit the impact of the tax increases by saying the higher capital gains and dividend rates would only apply to couples earning more than $500,000 a year.
Officials said that the relatively low capital gains tax rate with a top rate of 20 percent has enabled the 400 highest-earning taxpayers — with $139 million or more of income — to pay an average rate of 17 percent when the top income tax rate is 35 percent.
The proposal to impose a 7 basis point fee on financial institutions with assets of more than $50 billion will also run into opposition from big banks and insurance companies. The administration compared the fee with a proposal by former House Ways and Means Committee chairman Dave Camp, R-Mich., for an excise tax on large financial institutions. And last week, the House Budget Committee’s ranking Democrat, Rep. Chris Van Hollen, D-Md., proposed a 0.1 percent surcharge on financial market transactions.
An administration official said on Saturday that the goal of the proposed fee from the White House was to discourage big financial institutions from excessive borrowing.
He said that despite banking revisions after the 2008-09 financial crisis, highly leveraged financial institutions “still pose risks to the broader economy,” adding that “this fee is designed to make that activity more costly.”
The economic recovery has freed Obama to push for more ambitious domestic policies, many designed to help those in the lower and middle class who are lagging behind. In the past week, Obama has announced proposals on paid sick leave, free community college tuition and expanded broadband access. Although he might have trouble pushing those through the GOP-controlled Congress, Obama could end up defining some of the key issues for the elections in 2016.
“The battle for the next American agenda is already on,” said Donald Baer, chief executive of Burson-Marsteller and formerly chief speechwriter for President Bill Clinton. “There’s this effort to define a new growth and share agenda — growth but not only growth alone, and sharing the growth but not just sharing the wealth.”
Now the president is so comfortable with the idea of talking up the economic recovery that his advisers have branded it — “America’s resurgence” — and made it a regular talking point in Obama’s stump speeches and weekly radio addresses. And it is likely to be a centerpiece of the State of the Union address.
How to watch
Time: 7 p.m. Tuesday
Where: ABC, CBS, NBC, Fox, CNN
