WASHINGTON — President Barack Obama will outline a plan to raise taxes on the wealthiest Americans while offering broad economic benefits to the middle class in his nationally televised State of the Union address Jan. 20, a message that appears aimed at driving the debate in the 2016 election on the issue of economic inequality.
With Republicans in control of both houses of Congress for the first time in eight years, the White House has no hope of the tax proposal becoming law, but Obama appears determined to push the measure as a means of highlighting the different goals of Democrats and newly ascendant Republicans.
But Obama’s proposal could put tax-averse congressional Republicans in the spot of blocking measures that would offer broad economic benefits to the middle class.
The debate over middle-class economics is looking critical for the coming 2016 campaign.
“Inequality- and especially the growing opportunity gap – have become the top litmus test of seriousness for 2016,” said Robert Putnam, a Harvard political scientist who has discussed inequality issues with the President and his advisers.
“The entry ticket for the Presidential sweepstakes is that you have a policy — some policy — for dealing with this issue.”
Indeed, potential Republican candidates Jeb Bush and Mitt Romney have been talking openly about income inequality and the need to give lower-earning Americans more opportunities.
On the Democratic side, Massachusetts Sen. Elizabeth Warren appears intent on keeping the party focused on a populist economic agenda, even if she doesn’t plan to run for President herself.
An intense partisan battle has dominated Obama’s first six years in office and is only growing fiercer with the 2016 presidential race heating up.
In the early days of the new session of Congress, Obama already has threatened to veto five pieces of Republican-sponsored legislation aimed at undoing many of the key successes of his presidency — among them measures that would force construction of a pipeline to carry Canadian tar sands oil to refineries on the U.S. Gulf coast, overturn Obama’s executive actions on immigration and roll back his health care reform law.
Now Obama is further challenging the opposition party with tax proposals that will be the centerpiece of his speech.
The plan would increase the capital gains tax rate on couples making more than $500,000 per year to 28 percent, the same level as under President Ronald Reagan in the 1980s. The top capital gains rate has already been raised from 15 percent to 23.8 percent during Obama’s Presidency.
Obama also wants to 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.
Officials said the overwhelming impact of the change would be on the top 1 percent of income earners. Obama also wants to impose a fee on the roughly 100 U.S. financial firms with assets of more than $50 billion.
Administration officials said much of the $320 billion in new taxes and fees generated over a decade would be used for measures aimed at helping the middle class, including a $500 tax credit for some families with two spouses working and a $60 billion program to make community college free.
Obama is also asking lawmakers to increase paid leave for workers. And he’s moved unilaterally to lower a mortgage insurance rate that could help attract first-time homebuyers.
The White House cast the President’s measures as steps that can help keep up economic momentum amid a recent spurt of growth that has also seen the unemployment rate fall below 6 percent.
Republicans lawmakers indicated they would oppose Obama’s tax plan. Florida Sen. Marco Rubio, who is weighing a bid for the Republican presidential nomination, said the President’s approach was flawed.
“Raising taxes on people that are successful is not going to make people that are struggling more successful,” Rubio said. Obama aides were not surprised.
“Are they going to agree on everything? Absolutely not. I think we should have a debate in this country between middle-class economics and trickle-down economics and see if we can come to an agreement on the things we do agree on,” White House senior advisory Dan Pfeiffer said.
The effort to control Ebola is expected to be among the foreign policy matters Obama addresses in the speech.
While the President is not likely to make any major foreign policy announcements, he is expected to tout the formal end of the Afghan war, update the nation on the fight against the Islamic State group in Iraq and Syria, and urge lawmakers not to enact new sanctions on Iran while the U.S. and its partners are in the midst of nuclear negotiations with the Islamic republic.