US & Canada

State of the Union: Obama to seek tax raises on wealthy

President Obama pictured in 2015 Image copyright Reuters
Image caption President Obama is keen to set the agenda for the remainder of his presidency

President Obama is to use Tuesday's State of the Union speech to call for tax increases on the wealthy to help the middle class, officials say.

The proposals would raise $320 billion (£211 billion) over a decade, to fund benefits such as tax credits.

The speech is the centrepiece of the US political diary and may shape both Mr Obama's legacy and the 2016 election.

But the president faces resistance to his proposals, with Republicans controlling both Houses of Congress.

With the US economy growing, President Obama will stress that it is time for ordinary US families to feel the benefits.

According to US officials, who spoke on condition of anonymity, the plans include:

  • Closing a loophole allowing the wealthiest Americans to pass on certain assets tax free
  • Raising capital gains tax on the richest earners from 23.8% to 28%
  • New fees on US financial firms with more than $50 billion (£33 billion) in assets

The revenues would raise more than enough to fund the proposed benefits for the middle class, according to the officials.

These include tripling child tax credits, help for families with two working spouses and extra incentives to save for retirement.

Image copyright Reuters
Image caption Latest figures showed the US economy growing at its fastest rate for eight years

Analysis: Naomi Grimley, BBC News, Washington

There's growing confidence in the White House about the strength of America's economic recovery - as President Obama told the UK Prime Minister David Cameron last week, "we must be doing something right".

But there's also an awareness that for many middle class Americans wages still feel stagnant.

A growing theme in US politics is the need to make sure the economic recovery extends to all and that there's social mobility for those with aspirations.

Of course, as well as the freedom afforded him by the improving economic picture, there's also the fact that the president isn't seeking re-election himself.

It means Mr Obama can help set the political weather for the 2016 election, even though he knows these new tax rises will provoke opposition in the new Republican Congress.

Still, there's a desire not to frighten the horses too much. The White House is stressing 99% of these increases will fall on the richest 1%.

Image copyright Getty Images
Image caption The president's plans are set to be resisted by the Republicans, who took control of both Houses of Congress in November elections

The speech is also set to include a plan to expanding free community college education and proposals on cyber-security.

The State of the Union speech will be President Obama's first since the Republicans seized control of the two Houses of Congress at elections last November.

'Tax hike'

His proposals have already been dismissed by some in the party.

"Slapping American small businesses, savers, and investors with more tax hikes only negates the benefits of the tax policies that have been successful in helping to expand the economy, promote savings, and create jobs," Senate Finance Committee Chairman Orrin G Hatch said.

Administration officials hope to find some common ground with their opponents.

They also say the increase in capitals gains taxes, likely to be resisted by many Republicans, returns the rate to what it was under President Ronald Reagan in the 1980s.

The New York Times said the decision to present the tax plan during Tuesday's speech marked the start of a debate over taxes and the economy that will shape both the president's legacy and the 2016 presidential campaign.

Image copyright Reuters
Image caption Joni Ernst has been picked to respond to the speech by the Republicans

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