Democratic dreaming? Obama aims to raise taxes for richest Americans to help middle class
In his upcoming State of the Union Address, Barack Obama is expected to lay out a plan to hike taxes on America’s wealthiest individuals and corporations in an effort to address the country's growing inequality.
Assuming Obama’s plan makes it through the harsh terrain of a Republican-controlled Congress, the initiative would free up $320 billion in tax revenue over the next decade to spend on a variety of government-sponsored programs, White House officials told the New York Times on condition of anonymity.
Just this month, for example, Obama announced a plan to provide
students with two years of community college education free of
charge. While that may sound enticing, the proposal does little
to help another group of disgruntled Americans – an army of university students who have failed
to find employment following graduation - who are stuck holding
the bill on over a trillion dollars’ worth of student loan debt.
In order to raise more cash for government-sponsored programs, as well as providing tax relief for the middle class, Obama wants to close many of the tax loopholes now open to wealthy individuals and firms. One of these involves inherited assets, which allows individuals to receive about $5.4 mln dollars in inheritance without having to pay any taxes on that amount.
Critics say the practice, introduced by the Bush administration, has helped to aggravate income inequality between the US rich and poor to historic levels.
Meanwhile, many US corporations are taking advantage of their international status, keeping their profits in offshore bank accounts. This highly controversial practice allows hundreds of companies them to actually pay less in federal taxes than the average middle-class American household.
The Democratic leader also plans to increase the capital-gains
tax rate, to 28 percent from 23.8 percent, for families with
annual incomes above $500,000. Such a measure would provide
Washington with an extra $210 billion to implement its policies
and give a break to the American middle class, which continues to feel the aftershocks of the 2008
financial crisis at the same time that Wall Street surges.
Other benefits include a $500 credit for working couples with children, nearly tripling the tax credit for child care to $3,000 per child, as well as introducing education tax incentives to ensure the American workforce keeps pace with technological and informational advances in the workplace.
News of the president’s initiatives has already attracted the wrath of Republican politicians, many of them dedicated to safeguarding the interests of their wealthy constituents, which now include multinational corporations.
“The president needs to stop listening to his liberal allies who want to raise taxes at all costs and start working with Congress to fix our broken tax code,” said Senator Orrin G. Hatch, Republican of Utah and chairman of the Finance Committee, as quoted by the New York Times.
Washington’s failure to fully address the issue of US inequality
following the 2008 crisis, which saw the government rushing to
rescue the “too big to fail” banks and corporations, endowing
them with trillions of dollars of taxpayer-paid rescue packages,
looks in need of a correction.
However, Obama’s plans to restructure tax rates to the disadvantage of America’s wealthiest citizens will be a tough uphill battle, if the Democrats’ past experience in working with the Republicans is any indication. .
In 2012, for example, the Treasury Department proposed to slash the corporate tax rate to 28 percent from 35 percent, as well as provide US corporations a so-called “tax holiday” in an effort to repatriate billions of dollars in profits now locked in overseas accounts.
The proposal floundered in Congress and ultimately failed. It will be a surprise if similar calls for change today are any more successful.