Republicans and anti-tax advocates are up in arms over a new tax plan President Barack Obama is expected to fully unveil during his State of the Union speech Tuesday night.
On Saturday, the White House released the initial details about $320 billion in new taxes the president plans to implement over a 10-year period.
The proposals include provisions for raising the base capital gains tax rate to 24.2 percent from 20 percent. The increase brings the total capital gains tax to 28 percent when factoring in the 3.8 percent Medicare surcharge, up from a total of 23.8 percent.
The president’s plan also includes provisions for a new “bank tax” on institutions with assets totaling more than $50 billion, new limits on contributions to IRA and 401(k) type accounts, and changes that would amount to a hike in the nation’s death tax.
Americans for Tax Reform, an anti-tax group headed by Grover Norquist, has decried all of Obama’s proposals, paying special attention to changes in the inheritance tax.
The group notes that the plan implements a “second death tax”:
Under current law, when you inherit an asset your basis in the asset is the higher of the fair market value at the time of death or the decedent’s original basis. Almost always, the fair market value is higher.
Under the Obama proposal, when you inherit an asset your basis will simply be the decedent’s original basis.
Example: Dad buys a house for $10,000. He dies and leaves it to you. The fair market value on the date of death is $100,000. You sell it for $120,000. Under current law, you have a capital gain of $20,000 (sales price of $120,000 less step up in basis of $100,000). Under the Obama plan, you have a capital gain of $110,000 (sales price of $120,000 less original basis of $10,000).
… If you are going to hold an estate liable for tax, you can’t then hold the estate liable for tax again when the inheritor sells it. This adds yet another redundant layer of tax on savings and investment. It’s a huge tax hike on family farms and small businesses.
Norquist likened Obama’s lust for higher taxes to the sexual impulses of a teenage boy.
“Democrats are demanding, yet again, tax increases on America. This never ends. When it comes to tax hikes Democrats are like a teenage boy on a prom date: They keep asking the same question different ways but always to the same point,” he said.
Still, the White House defended Obama’s tax plan over the weekend, saying the “president is not piling on additional taxes.”
“These are proposals he thinks are necessary to fill out the vision of how the middle class can get ahead in today’s economy,” an administration official said Saturday.
For the Obama administration, helping the middle class get ahead involves using the tax increases to implement $235 billion in new programs the president has announced over the past week, including expansions in broadband Internet service, mortgage incentives for U.S. families and a proposal to provide two years of free community college to eligible students.
The president’s proposal also calls for a new $500 tax credit for two-income families, an increase in tax credits for childcare and new tax breaks to incentivize college.
White House officials have said that GOP pushback should be limited because Republicans have supported similar tax proposals in the past.
But Republicans argue that Obama’s current proposals will end up hurting more Americans than they help.
“We’re not just one good tax increase away from prosperity in this nation,” Rep. Jason Chaffetz (R-Utah), House Oversight and Government Reform chairman, said on CNN Sunday.
A spokesman for House Ways and Means Chairman Paul Ryan (R-Wis.) said that Obama’s proposals don’t represent a serious plan for helping middle class families.
“We lift families up and grow the economy with a simpler, flatter tax code, not big tax increases to pay for more Washington spending,” the spokesman told The Hill.