In conjunction with his State of the Union address, President Obama proposed new taxes on the wealthy to raise $320 billion in revenue, to be spent on new government programs to help the middle class and working families. The proposal would raise funds by:
- Eliminating stepped-up basis at death (a provision the President dubs the “trust fund loophole”).
- Increasing the top capital gains and dividend tax rate to 28% (currently the rate is 25%, including the 3.8% Obamacare tax on investment income and the phase out of itemized deductions).
- Imposing a 7 bps fee on the liabilities of U.S. financial firms with assets over $50 billion.
Th President’s proposal stands virtually no chance of passage by the Republican-led Congress. Indeed, in making the proposal, the President seems to be flagging his unwillingness to compromise what he believes are necessary social programs to help the middle class, the 2014 Republican Congressional victory notwithstanding. The takeaway, I think, is that Obama has little inclination to work with Congress to fashion bipartisan tax legislation, at least legislation addressing individual taxes. Obama has shown more willingness to reform the corporate tax system, which could lead to a bipartisan effort this year.
Andrew H. Friedman is the principal of The Washington Update LLC and a former senior partner in a Washington, D.C. law firm. He speaks regularly on legislative and regulatory developments and trends affecting investment, insurance, and retirement products. He may be reached at www.TheWashingtonUpdate.com.
Neither the author of this paper, nor any law firm with which the author may be associated, is providing legal or tax advice as to the matters discussed herein. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness. It is not intended as legal or tax advice and individuals may not rely upon it (including for purposes of avoiding tax penalties imposed by the IRS or state and local tax authorities). Individuals should consult their own legal and tax counsel as to matters discussed herein and before entering into any estate planning, trust, investment, retirement, or insurance arrangement.
Copyright Andrew H. Friedman 2015. Reprinted by permission. All rights reserved.
