Obama proposes closing tax loopholes on the wealthiest

US President Barack Obama AP FILE PHOTO

WASHINGTON, United States–US President Barack Obama on Saturday proposed to close tax loopholes for the wealthiest Americans as part of the new economic strategy he plans to unveil in this year’s State of the Union address.

However, the plan, which includes raising the top tax rate on capital gains, charging financial firms a fee for heavy borrowing, and changing the tax rules for trust funds, is unlikely to pass in its current form in Congress, where, as of this month, Republicans control both houses.

In a fact sheet, the White House argued the US “tax code is unfair, allowing the rich to play by different rules.”

Contending that “the 400 richest taxpayers paid an average tax rate below 17 percent in 2012, lower than many middle class families,” the White House said Obama’s proposals aim to “help level the playing field for the middle class.”

Republicans and the White House have both said tax reform could be one area of agreement this year – but the two sides disagree fundamentally about what shape the reforms should take.

Republicans want the changes to balance each other out, without a net increase in tax revenue. Obama and the Democrats prefer a plan that would increase tax revenues to fund extra social spending.

This note was evident in the proposal Saturday, where the White House argued that “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.”

The increased taxes on the wealthiest and on big businesses would also help fund tax cuts the White House says will help tens of millions of people in the middle class.

The proposed cuts include a new $500 credit for two-income families and an expansion of child care and education tax benefits.

The proposal also includes a plan to require more employers to automatically enrol their employees in tax-preferred savings accounts, called IRAs, and to offer retirement savings plans to part-time employees.

Meanwhile, the White House plan would increase the maximum tax on capital gains to 28 percent, the level it was under former Republican president Ronald Reagan.

And a new fee would hit the 100 biggest US banks – with assets over $50 billion – increasing their borrowing costs.

Obama will deliver his annual State of the Union address Tuesday before the Republican-led congress, with a speech expected to focus on the them that it’s time for Americans to benefit from the country’s economic growth after years of recession.