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Obama Proposes Tax Hikes on Higher Income Households

Barak Obama-United States-PoliticsThe new Republican led Congress will be called on by President Obama to hike taxes on inherited property and investments. In addition, Obama is asking Congress to either create or expand various tax break ranges specific to middle-income families. As such, this opens the chance for taxation to be debated by both Republicans and Democrats looking to find a compromise.

The measures of Obama’s request will be outlined in Tuesday night’s State of the Union address. During this time, a proposal to use generated revenue from the tax increases will be made. ,High-income households would take the brunt of the proposal in being required to pay for the new breaks that are intended to boost stagnant earnings for low to middle-income households.

According to senior administrative officials, part of the initiatives would consist of the child care tax credit being tripled and a new credit for families where both spouses are employed being created. There are also plans by the administration to consolidate and expand tax breaks pertaining to education.

Also, the proposal would make programs available to a large number of people for retirement savings. For instance, many employers that do not currently offer a retirement plan to workers would be required to enroll them automatically in an individual retirement account. As claimed by the administration, roughly 30 million additional people in the workplace would have access to retirement savings programs under the new proposals.

In Tuesday’s speech, the process of determining where President Obama will find middle ground in Congress will begin. Obama, as well as the GOP agrees a tax overhaul coupled with trade, could provide the needed area of compromise.

The proposals set out by Obama reach beyond overhauling taxes for businesses, something the White House had shown a willingness to undertake previously, to making changes to the individual tax code but lawmakers on the Republican side argue a tax overhaul should not just be focused on businesses but individuals as well.

However, the position of the new White House could actually make the debate more complicated by pointing out significant differences philosophically between the Republicans and Democrats.

The way in which broad changes to tax bills of richer taxpayers would be accomplished by the White House is primarily by increases taxes paid on investments. If approved, the top rate for capital gains would jump from 23.8% to 28%. In addition to this, capital gains tax would be imposed on more inherited assets.

A number of major tax breaks for low to middle-income households would be created or expanded. As an example, a new $500 credit for families where both spouses work would be established. Then, the value of the child care credit per child would be tripled to $3,000. Another significant change would involve making the child care credit available to a larger number of middle-income households.

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