Obama to go after oligarchs in upcoming State of the Union address

The state of the union is pretty good, actually, but President Obama has an idea to make it better: taxing Wall Street and the super-rich to make middle-class work even more worthwhile. It's Piketty with an American accent.

Okay, that's a little bit of an exaggeration, but not a huge one. Obama's State of the Union, you see, will call for $320 billion of new taxes on rentiers, their heirs, and the big banks to pay for $175 billion of tax credits that will reward work. In other words, it's fighting a two-front war against a Piketty-style oligarchy where today's hedge funders beget tomorrow's trust funders. First, it's trying to slow the seemingly endless accumulation of wealth among the top 1, and really the top 0.1, no actually the top 0.001, percent by raising capital gains taxes on them while they're living and raising them on their heirs when they're dead. And second, it's trying to help the middle help itself by subsidizing work, child care, and education.

Here's what it would do exactly.

1. End the step-up basis for capital gains. Unless you've inherited money, you might not realize that there's a pretty big loophole that lets heirs avoid a lot of capital gains from ever being taxed. It's called "step-up basis," and the Congressional Budget Office (CBO) estimates it will cost the government about 0.3 percent of GDP the next decade.

Here's how it works. Now, imagine you bought $1 million worth of stocks that are worth $10 million by the time you pass away. That's a $9 million capital gain you'd owe tax on, which, at the 23.2 percent rate, works out to a little more than $2 million check for Uncle Sam—unless you leave the stock to, say, your kids.

Then it's like your capital gain never happened, at least from the taxman's perspective. That's because the capital gain your heirs are taxed on isn't based on the original price, or basis, that you bought it at. It's based on the base that they receive it at. So, in this case, your kids would only owe taxes on any gains above $10 million. This, as you could guess, helps the people who have the most money to leave to their families the most. Indeed, you can see that in the chart below from the liberal Center for American Progress. The top 1 percent of households got 21 percent of the total benefits from stepped-up basis, the next 4 percent got 28 percent, and everybody else got the other half.

But there would be exceptions to getting rid of step-up basis, of course. Couples, for one, wouldn't have to pay any capital gains tax until they had both passed away. They also would get a $200,000 capital gain exception that they wouldn't owe any tax on, in addition to a $500,000 exception for their home. Things like furniture, clothing, and small heirlooms would be exempt, too. Family-owned businesses wouldn't have to pay any capital gains until or unless the business was sold, and slightly bigger, closely-held businesses would have 15 years to pay whatever they owe.

And it's not really an exception, but a loophole to ending the step-up basis loophole is that any capital gains payments, which would now be made at death, would be deductible from the estate tax. But that, remember, only hits individuals leaving more than $5.43 million, or couples leaving more than $11 million.

2. Raise the top capital gains tax rate from 23.8 to 28 percent. This is straightforward enough. Money you get from investments is taxed less than money you get from, you know, actually working, and while that might be good for the economy, it's not good for a basic sense of fairness. Not when the top 400 households are getting 16 percent of all capital gains, and the top 0.1 percent are getting half of them. That's why, as the Congressional Budget Office (CBO) dryly puts it, "preferential tax rates on dividends and capital gains provide almost no benefit to households in the bottom four quintiles, but provide notable benefits to households in the top quintile".

So Obama wants to push the top capital gains tax rate, which only applies to couples making more than $500,000, up from its current level of 23.8 percent to 28 percent, where it was when Ronald Reagan left office. In all, the White House calculates that increasing the capital gains tax and getting rid of step-up basis would raise 99 percent of its money from the top 1 percent, with 80 percent of that coming from the top 0.1 percent.

3. Tax the big banks for being big. This is a new old idea that not only has Obama talked about before, but so has Republican Dave Camp. This latest iteration would impose a 0.07 percent fee on all liabilities for banks with at least $50 billion on the books. This isn't the government trying to break up too-big-to-fail banks, but it might nudge shareholders to do so. Tougher rules and tougher capital requirements, you see, have already started to make the biggest banks look uneconomical. Goldman Sachs even went so far, in a master class of trolling, as to suggest that JP Morgan Chase, the biggest of the bunch, would be better for shareholders if it split into four parts. That'd only be more true if the Citgroups of the world had to pay a fee that offset some of the subsidy they got from other lenders for being perceived as too-big-to-fail. Activist investors would push management to shrink their banks to the $50 billion threshold, either by breaking up their businesses.

4. Subsidize middle-class work. The economy is finally adding jobs at a healthy clip, but wages still aren't rising and people are still dropping out of the workforce. These last two, as you might expect, are related. If you're a stay-at-home parent, it's not just a matter of wanting to work. It's a matter of whether working makes financial sense. Once you add up the costs of childcare and commuting, a lot of times it doesn't. That's why Obama wants to introduce a second-earner tax credit of $500, the full value of which would be available to families making up to $120,000 and would then phase out until $210,000, to try to make work worth it for stay-at-home parents. And why he wants to not only triple the maximum value of the Child Care Tax Credit to $3,000, but also massively expand who can claim it by letting households making up to $120,000 do so.

That's not all. As he has before, Obama is calling for the Earned Income Tax Credit to be doubled for childless workers, to try to get more young men in particular into the workforce—an idea that Republican Paul Ryan has endorsed. In addition, Obama is asking for college tax credits to be streamlined, extended, and expanded so that $1,500, rather than $1,000, is refundable. And finally, Obama wants to help more workers save for retirement by automatically enrolling them in an IRA if their job doesn't have one.

None of this, it's worth pointing out, is welfare. It's helping people who are already helping themselves, either by going to school, working, or saving for retirement. It's just acknowledging that growth alone hasn't been enough to do that for a long time now. And these are ideas, to be honest, that some Republicans support too. The question, then, isn't how to help the middle class. It's how to pay for it. Obama wants to make the top 1 percent and Wall Street do so. Republicans don't.

That, like every other one, will be what the 2016 election is about.

boards of FL wrote:....4. Subsidize middle-class work. The economy is finally adding jobs at a healthy clip, but wages still aren't rising and people are still dropping out of the workforce. These last two, as you might expect, are related. If you're a stay-at-home parent, it's not just a matter of wanting to work. It's a matter of whether working makes financial sense. Once you add up the costs of childcare and commuting, a lot of times it doesn't. That's why Obama wants to introduce a second-earner tax credit of $500, the full value of which would be available to families making up to $120,000 and would then phase out until $210,000, to try to make work worth it for stay-at-home parents. And why he wants to not only triple the maximum value of the Child Care Tax Credit to $3,000, but also massively expand who can claim it by letting households making up to $120,000 do so.

That's not all. As he has before, Obama is calling for the Earned Income Tax Credit to be doubled for childless workers, to try to get more young men in particular into the workforce—an idea that Republican Paul Ryan has endorsed. In addition, Obama is asking for college tax credits to be streamlined, extended, and expanded so that $1,500, rather than $1,000, is refundable. And finally, Obama wants to help more workers save for retirement by automatically enrolling them in an IRA if their job doesn't have one.

None of this, it's worth pointing out, is welfare. It's helping people who are already helping themselves, either by going to school, working, or saving for retirement. It's just acknowledging that growth alone hasn't been enough to do that for a long time now. And these are ideas, to be honest, that some Republicans support too. The question, then, isn't how to help the middle class. It's how to pay for it. Obama wants to make the top 1 percent and Wall Street do so. Republicans don't.

That, like every other one, will be what the 2016 election is about.

President Barack Obama will use his annual State of the Union address to propose hundreds of billions of dollars in tax hikes on America's "one per cent" in a move that will increase tensions with the Republican-dominated Congress.

Mr Obama will call for raising the capital gains rate on high earners, the elimination of a tax break on inheritances, and the implementation of a fee on large financial firms lending and borrowing money, which he calculates would together raise $320 billion over the next decade.

The president will propose using the money to benefit middle class working families and extend education programmes.

An Obama administration official said 99 per cent of the effects of the proposed tax increases would hit the highest one per cent of earners. Some Republicans immediately called the proposals a "non-starter".

The most important speech in the US political calendar comes two years before Mr Obama's scheduled departure from the White House and he has vowed to spend that time "playing offence".

It is the first time since his election in 2008 that he will be delivering the State of the Union to a Congress in which both houses are entirely controlled by his Republican adversaries.

However, the huge television audience – 33 million watched the State of the Union last year – will allow him to put Republicans in the position of having publicly to defend the wealthy.

One Obama administration official said: "The middle class has yet to experience the prosperity shown in the recovery and what will be new on Tuesday night is the vision that he has for how we finish that job."

Under Mr Obama's proposals the capital gains rate on couples making more than $500,000 per year would rise to 28 per cent. He has previously raised it from 15 per cent to 23.8 per cent.

His officials noted that it was 28 per cent during the Republican presidency of Ronald Reagan in the 1980s.

Mr Obama also wants to close the so-called "trust fund loophole," meaning capital gains taxes on securities would have to be paid at the time they are inherited. An administration official called it the "single biggest loophole in our tax system today".

Of the $320 billion total Mr Obama proposes to raise, $110 billion would come from a fee on about 100 US financial firms with assets of more than $50 billion. The fee would make it more costly for them to engage in high risk lending and borrowing and mean extra burdens on Wall Street banks.
The president is also expected to call for community colleges to be made free for many students – at a cost of $60 billion.

His proposal will outline spending of $175 billion to benefit the middle class, including increases in paid leave for workers.

There would be a credit of up to $500 for families in which both parents work, and the tax credit for child care would be expanded up to $3,000 for each child under five.

Administration officials said they believed there was room for a "bipartisan" way forward on the proposals.

But Republicans, who want to lower or abolish capital gains tax, immediately criticised them.

Senator Orrin Hatch, Republican chairman of the Senate Finance Committee, said: "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.

"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."

A spokesman for former Republican vice presidential nominee Paul Ryan, said: "This is not a serious proposal. We lift families up and grow the economy with a simpler, flatter tax code, not big tax increases to pay for more Washington spending."

PkrBum wrote:It's just political theater. If he were serious about the whole deal he would've done it instead of obamacaid.

boards of FL wrote:

PkrBum wrote:It's just political theater. If he were serious about the whole deal he would've done it instead of obamacaid.

It's amazing how little of an explanation is needed to explain away reality...if you're an idiot.


Political theater! Done!

PkrBum wrote:

boards of FL wrote:

PkrBum wrote:It's just political theater. If he were serious about the whole deal he would've done it instead of obamacaid.

It's amazing how little of an explanation is needed to explain away reality...if you're an idiot.


Political theater!  Done!

Why else would he have waited until the left had no congressional control for the big populist class intervention?

Gawd you're slow. At best he can leverage a few small details in exchange for pub tax reforms. That's politics poindexter.

boards of FL wrote:

PkrBum wrote:

boards of FL wrote:

PkrBum wrote:It's just political theater. If he were serious about the whole deal he would've done it instead of obamacaid.

It's amazing how little of an explanation is needed to explain away reality...if you're an idiot.


Political theater!  Done!

Why else would he have waited until the left had no congressional control for the big populist class intervention?

Gawd you're slow. At best he can leverage a few small details in exchange for pub tax reforms. That's politics poindexter.

Obama has been pushing for increased taxes on the top tier brackets throughout his entire presidency.  It's not as if this idea is unique to the upcoming state of the union.  This is why your "political theater" comment is laughable. Meanwhile, your "trickle down" theory is even worse than laughable. It is flat out stupid.

You realize this, right?

PkrBum wrote:

boards of FL wrote:

PkrBum wrote:

boards of FL wrote:

PkrBum wrote:It's just political theater. If he were serious about the whole deal he would've done it instead of obamacaid.

It's amazing how little of an explanation is needed to explain away reality...if you're an idiot.


Political theater!  Done!

Why else would he have waited until the left had no congressional control for the big populist class intervention?

Gawd you're slow. At best he can leverage a few small details in exchange for pub tax reforms. That's politics poindexter.

Obama has been pushing for increased taxes on the top tier brackets throughout his entire presidency.  It's not as if this idea is unique to the upcoming state of the union.  This is why your "political theater" comment is laughable.  Meanwhile, your "trickle down" theory is even worse than laughable.  It is flat out stupid.

You realize this, right?

You do realize that enriching the wealthy has been the result... right? If not for stagnant wages this bs doesn't fly.

Which seems odd in itself since this is the greatest economic period in the entire history of keynesian mankind.

2seaoat wrote:Returning the capital gains rate to what it was is not something which is radical, rather it is almost reactionary........going back to the way things were in the good old days when Americans were not so separated by wealth and privilege, and when we had a robust economy and were not being exploited by special interests who bought and sold congress as necessary.

PkrBum wrote:Well... let's take this a point at a time populist boi. The main gist of your "nudge" deception is to tax or subsidize what you subjectively FEEL is best for humanity... correct? So what you tax... you desire and expect less of... correct?

Well the big target evil social movement I see so far is capital gains... right? I wonder what less investors might do?