Obama plan to raise capital gains expected to be announced tonight
by James O’Connor
When President Barack Obama delivers the State of the Union address tonight he is expected to announce a plan to raise the capital-gains tax for Americans earning $500,000 or more from 23.8 to 28 percent.
Obama is also expected to call on Congress to close the loophole on inheritance tax.
Under the proposal, the administration would raise the tax on earning of $500,000 or more from 23.8 to 28 percent.
According to the Center for American Progress, “the average tax rate for these extremely wealthy taxpayers has fallen dramatically in recent decades. The top 400 taxpayers faced an average tax rate of 26.38 percent in 1992, which fell to 19.91 percent by 2009. This tax cut for the extremely wealthy can be explained almost entirely by reductions in the capital gains rate. The correlation between these two drops is nearly perfect, with 95 percent of the change in the average tax rate for the top 400 taxpayers explained by capital gains tax cuts. This trend has likely reversed in recent years to some extent, since the top capital gains tax rate has increased from 15 percent in 2009 to 23.8 percent today.”
The proposal, dubbed by some as the “Robin Hood plan” is expected to raise over 300 billion in taxes.
“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,” the administration said in a summary.
The administration’s plan would also extend expiring parts of the child tax credit, the earned income tax credit for low-income workers and create a new $500 “second-earner credit.” The new provision is aimed at married couples, particularly those with young children, who may feel it doesn’t make economic sense for both to work.
The administration’s plan includes a proposal to extend the American Opportunity Tax Credit, the higher-education tax benefit that’s scheduled to expire at the end of 2017, while making it more valuable to low-income students.
Image: Flickr/Barack Obama