Obama tax challenge to foes

Hillary Clinton. Photo / AP

President’s plan aims to assist middle-class Americans ... and Hillary Clinton’s chances

Making his sixth State of the Union address today, US President Barack Obama will look straight past his party's rout in November's congressional elections to throw down the gauntlet to the Republican majority on raising taxes on the rich to help the middle class.

The speech will highlight a President seemingly unleashed by his lame-duck circumstances.

He has nothing to lose electorally; his party is already a minority in both chambers of Congress.

This means little of what he will propose - US$320 billion ($297 billion) in new taxes over 10 years to fund tax cuts for the middle class and new assistance for college tuition - is ever likely to win support in the current Congress.

But it may put Republicans on the defensive, even in their honeymoon period, about the best way to close the vast chasm between the super-rich in America and everyone else.

The White House believes it can win the debate on wage stagnation and the still-lacklustre fortunes of most Americans. It also knows it is one that will carry into the next race for the White House. Obama may be laying the groundwork for the campaign of his party's next nominee, widely expected to be Hillary Clinton.

Obama's tax plan will call for a US$320 billion increase in tax revenue by increasing the capital-gains rate for couples earning US$500,000 or over to 28 per cent from the current 23.8 per cent.

He would close a "trust-fund loophole" by forcing estates to pay capital gains on securities the moment they are inherited and he also envisages a new fee on large financial institutions.

State of the Union plan
• Increase the capital gains tax rate on couples making more than US$500,000 a year to 28 per cent.
• Close what the Administration is calling the "trust fund loophole", a change that would require estates to pay capital gains taxes on securities at the time they are inherited.
• Obama also wants to impose a fee on the roughly 100 US financial firms with assets of more than US$50 billion.