Obama to seek tax increases on the wealthy

US President Barack Obama will use his State of the Union address to call on Congress to raise taxes and fees on the wealthiest Americans as a cost-saving measure for the middle class.

Senior administration officials said on Saturday that Obama will announce the proposal in his annual address, his first before a Republican-led Congress, on Tuesday night.

The proposal includes some elements that have previously drawn support from both Republicans and Democrats, including education and retirement savings proposals and the secondary earner credit.

The administration is optimistic it will find some bipartisan support in the Republican-dominated House of Representatives and Senate, though it may still generate significant opposition from the Republicans because they would increase taxes.

In a conference call with reporters to preview the taxation aspect of Obama’s address, one official said some of the ideas the president is outlining already have “clear congressional bipartisan support or are ideas that are actually bipartisan in their nature”.

Obama also wants to impose a fee of seven basis points on the liabilities of US financial firms with assets of more than $50bn, making it more costly for them to borrow heavily.

The changes on trust funds and capital gains, along with the fee on financial firms, would generate about $320bn over 10 years, which would more than pay for benefits Obama wants to provide for the middle class, the official said.

Labour and student benefits

The benefits mentioned on Saturday would include a $500 credit for families with two working spouses, tripling the tax credit for child care to $3,000 per child.

It will also be consolidating education tax incentives and will be making it it easier for workers to save automatically for retirement if their employer does not offer a plan.

The proposal to streamline a jumble of educational tax credits will give students up to $2,500 annually towards earning a college degree.

Students who attend school less than half the time would also qualify for the first time, and more of the credit, $1,500, would be available regardless of whether an individual owed any taxes.

Obama has failed to find common ground with Republicans on fiscal matters, including during several attempts to strike a “grand bargain” on the budget.

The Treasury Department proposed a detailed corporate tax overhaul in 2012 that would have lowered the rate to 28 percent from 35 percent and given multinational corporations a one-time “tax holiday” to return billions of dollars in profits.