No, this isn't a Bernie Sanders infographicPaul Ryan's spokesperson has already chirped in that the bold tax plan President Obama is including in his State of the Union Tuesday is "not a serious plan. We lift families up & grow the economy with a simpler, flatter tax code, not big tax increases to pay for more spending." Ryan's plan is, of course, is based on the Austerity Agenda that has mired Europe in endless recession and on the so-called "dynamic scoring" (i.e., trickle down economics) that has bankrupted Kansas. I can't wait to hear Joni Ernst's response. The White House released the plan Saaturday evening, giving her plenty of time it read it and figure out how to denigrate it.The White House press release emphasizes that "Middle class families today bear too much of the tax burden because of unfair loopholes that are only available to the wealthy and big corporations. In his State of the Union address, the President will outline his plan to simplify our complex tax code for individuals, make it fairer by eliminating some of the biggest loopholes, and use the savings to responsibly pay for the investments we need to help middle class families get ahead and grow the economy." That sounds a lot more like the Obama who ran in 2008 than the Obama so many of his early supporters didn't vote for in 2012.
The President will put forward reforms that include eliminating the biggest loophole that lets the wealthiest avoid paying their fair share of taxes:• Close the trust fund loophole-- the single largest capital gains tax loophole-- to ensure the wealthiest Americans pay their fair share on inherited assets. Hundreds of billions of dollars escape capital gains taxation each year because of the “stepped-up” basis loophole that lets the wealthy pass appreciated assets onto their heirs tax-free. • Raise the top capital gains and dividend rate back to the rate under President Reagan. The President’s plan would increase the total capital gains and dividends rates for high-income households to 28 percent. • Reform financial sector taxation to make it more costly for the biggest financial firms to finance their activities with excessive borrowing. The President will propose a fee on large, highly-leveraged financial institutions to discourage excessive borrowing.By ensuring those at the top pay their fair share in taxes, the President’s plan responsibly pays for investments we need to help middle class families get ahead, like his recent proposal to make two years of community college free for every student willing to do the work. The savings will pay for additional reforms that will help the paychecks of middle-class and working families go further to cover the cost of child care, college, and a secure retirement:
• Provide a new, simple tax credit to two-earner families. The President will propose a new $500 second earner credit to help cover the additional costs faced by families in which both spouses work-- benefiting 24 million couples. • Streamline child care tax incentives to give middle-class families with young children a tax cut of up to $3,000 per child. The President’s proposal would streamline and dramatically expand child care tax benefits, helping 5.1 million families cover child care costs for 6.7 million children. The proposal will complement major new investments in the President’s Budget to improve child care quality, access, and affordability for working families. • Simplify, consolidate, and expand education tax benefits to improve college affordability. The President’s plan will consolidate six overlapping education provisions into just two, while improving the American Opportunity Tax Credit to provide more students up to $2,500 each year over five years as they work toward a college degree – cutting taxes for 8.5 million families and students and simplifying taxes for the more than 25 million families and students that claim education tax benefits. • Make it easy and automatic for workers to save for retirement. The President will put forward a retirement tax reform plan that gives 30 million additional workers the opportunity to easily save for retirement through their employer.
Ryan, Ernst and their allies are, no doubt, flipping out over the new tax on the 100 biggest financial institutions-- with north of $50 billion each-- basing the fee on liabilities in order to discourage risky borrowing (i.e., reckless gambling with taxpayer-insured funds), although there are some responsible mainstream conservatives that actually embrace this idea and it is similar to the one proposed last year by the pre-Ryan chairman of the House Ways and Means Committee, Dave Camp (R-MI). Matt O'Brien, writing for the Washington Post calls this Obama's Piketty moment-- "Piketty with an American accent." He wrote that "Obama's State of the Union... 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 become 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." Republicans are no doubt rending their clothes and tearing out their hair. Can you imagine daring to propose raising the top capital gains tax rate from 23.8 to 28%? It should be interesting to see how Wall Street fave Hillary Clinton reacts to this proposals that will be so hated by the people she's counting on the finance her presidential run.Note: Picketty moment or not, late last week the White House was heavily lobbying freshmen Democrats to back away from signing a letter circulating that adamantly opposes fast-tracking the Trans-Pacific Partnership, Obama's horrific, job-killing trade bill detested by progressives and demanded by Big Business and Wall Street. Many freshmen had their first experience of telling the White House, "Sorry, but no."