White House Rolls Out Tax Proposals Before State Of The Union Address
DAVID GREENE, HOST:
Usually the contents of a president's State of the Union speech are a pretty big secret, but the Obama White House has been dropping spoilers for most of the month. And tomorrow night, President Obama is expected to offer a number of ideas that cost money. Over the weekend, the White House rolled out a tax proposal that could cover some of the cost. Let's hear about it from NPR White House correspondent Tamara Keith.
TAMARA KEITH, BYLINE: The economy is finally indisputably better. Unemployment is down, corporate profits are up, but wages for the middle class and working poor haven't kept pace. And that, says Obama adviser Dan Pfeiffer, is the focus of this year's State of the Union address. He appeared on CBS's "Face The Nation."
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DAN PFEIFFER: Now that the economy's in a stronger place than it's been in a very long time, we need to double down on our efforts to deal with wage stagnation and declining economic mobility. And so the simple proposition that we should ask the wealthy to pay a little more and invest more in the middle class, give the middle class a raise.
KEITH: But the Obama administration's proposals to help the middle class cost money, and so they're looking to something White House officials call the trust fund loophole. Chuck Marr is director of federal tax policy at the Center on Budget and Policy Priorities, a left-leaning think tank.
CHUCK MARR: Wealthy people actually can hold their assets for their entire life, and then the tax liability that they owe is just erased.
KEITH: When they die, their heirs don't owe any capital gains taxes. Marr uses this example; let's say someone bought $100,000 of stock, and it gains value over the course of their life and is now worth $1 million. That's $900,000 of capital gains.
MARR: If the person had sold the stock, you know, a week before they died, they'd owed 24 percent on the 900,000, but if their heirs sell it the day after they died, they would owe zero.
KEITH: That's the loophole. The conservative group Americans for Tax Reform says what Obama is proposing would be a second death tax. Obama's plan would also raise the top tax rate on capital gains, and it would add a new fee for the nation's largest banks. Over a decade, administration officials say this would raise $320 billion, which would be used to fund a series of tax credits aimed at working families and programs to help pay for college. Edward Kleinbard is a professor of tax law at USC. He says the proposal is cleverly targeted.
EDWARD KLEINBARD: What the president is doing is making a very large investment in working- and middle-class Americans. And the source of the funds for the investment are coming from the most affluent Americans.
KEITH: The White House says the vast majority of the tax increase will come from the wealthiest one-tenth of 1 percent. There are protections built-in for small businesses, homes and surviving spouses. But this seems like a good place to pause and talk about political reality for a moment.
REPRESENTATIVE JASON CHAFFETZ: It's a nonstarter. We're not just one good tax increase away from prosperity in this nation.
KEITH: That splash of cold water comes from Republican Congressman from Utah Jason Chaffetz, who appeared yesterday on CNN's "State Of The Union."
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CHAFFETZ: More government, a 300-plus-billion-dollar tax bill from Barack Obama is not the formula for this country to succeed.
KEITH: And he was far from the only Republican trashing the president's plan. A spokesman for the chairman of the House tax writing committee said the plan wasn't serious. But for the White House, seeing this proposal become a reality isn't the only goal. They want these ideas to be part of the political conversation for the next two years. Tamara Keith, NPR News. Transcript provided by NPR, Copyright NPR.