President Obama will use his State of the Union address to call on Congress to raise taxes and fees on the wealthiest taxpayers and the largest financial firms to finance an array of tax cuts for the middle class, pressing to reshape the tax code to help working families, administration officials said on Saturday.
The proposal faces long odds in the Republican-controlled Congress, led by lawmakers who have long opposed raising taxes and who argue that doing so would hamper economic growth at a time the country cannot afford it. And it was quickly dismissed by leading Republicans as a nonstarter.
But the decision to present the plan during Tuesday’s speech marks the start of a debate over taxes and the economy that will shape both Mr. Obama’s legacy and the 2016 presidential campaign.
It is also the latest indication that the president, untethered from political constraints after Democratic losses in the midterm elections, is moving aggressively to set the terms of that discussion, even as he pushes audacious moves in other areas, like immigration and relations with Cuba.
The president’s plan would raise $320 billion over the next decade, while adding new provisions cutting taxes by $175 billion over the same period.
The revenue generated would also cover an initiative Mr. Obama announced this month, offering some students two years of tuition-free community college, which the White House has said would cost $60 billion over 10 years.
The centerpiece of the plan, described by administration officials on the condition of anonymity ahead of the president’s speech, would eliminate what Mr. Obama’s advisers call the “trust-fund loophole,” a provision governing inherited assets that shields hundreds of billions of dollars from taxation each year. The plan would also increase the top capital-gains tax rate, to 28% from 23.8%, for couples with incomes above $500,000 annually.
Those changes and a new fee on banks with assets over $50 billion would be used to finance a set of tax breaks for middle-income earners, including a $500 credit for families in which both spouses work; increased child care and education credits; and incentives to save for retirement.
The initiative signals a turnabout for Mr. Obama, who has spoken repeatedly about the potential for a deal with Republicans on business tax reform but little about individual taxation, an area fraught with disagreements.
“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,” said Senator Orrin G Hatch, Republican of Utah and chairman of the Finance Committee.
“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.”
Traditionally, at the State of the Union address, US Presidents not only reports on the condition of the nation but also outline their legislative agenda.
The State of the Union address is presented to the joint session of both houses of the US Congress.