Nation

In speech, Obama will urge higher taxes for wealthiest

President Barack Obama speaks during a joint news conference with British Prime Minister David Cameron in the East Room of the White House in Washington, Friday, Jan. 16, 2015. In a show of trans-Atlantic unity, President Barack Obama and British Prime Minister David Cameron pledged a joint effort on Friday to fight domestic terrorism following deadly attacks in France. They also strongly urged the U.S. Congress to hold off on implementing new sanctions on Iran in the midst of nuclear talks. (AP Photo/)

Evan Vucci/AP

President Barack Obama will call for raising the capital gains rate and eliminating a tax break on inheritances.

WASHINGTON — 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 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.

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But the decision to present the plan during Tuesday’s speech marks the start of a debate about taxes and the economy that will shape both Obama’s legacy and the 2016 presidential campaign.

It is also the latest indication that the president, untethered from political constraints after the midterm losses, 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.

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The president’s plan would raise $320 billion during the next decade, while adding new provisions cutting taxes by $175 billion in the same period. The revenue generated would also cover an initiative Obama unveiled this month, offering some students two years of tuition-free community college, which the White House has said would cost $60 billion during 10 years.

The centerpiece of the plan, described by administration officials on the condition of anonymity in advance of the president’s speech, would eliminate what Obama’s advisers call the “trust-fund loophole,” a provision governing inherited assets that shields hundreds of billions of dollars in inherited assets from taxation each year.

The plan would also increase the top capital-gains tax rate to 28 percent, from 15 percent, for couples with incomes above $500,000 annually.

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Those changes and a new fee on banks with assets of more than $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 Obama, who has spoken repeatedly about the potential for a deal with Republicans on an overhaul of taxes paid by businesses but little about individual taxation, an area fraught with partisan disagreements.

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. A tax on large banks was part of a plan proposed last year by former Representative Dave Camp, a Michigan Republican, who retired as chairman of the Ways and Means Committee.

Obama’s advisers characterized the plan as the next phase in the president’s economic message, which he has been promoting in the past two weeks with trips highlighting the nation’s financial rebound.

During the tour, Obama has pitched a range of initiatives to help the middle class, including free community college and paid leave. Both Democrats and Republicans see middle-class voters as an important bloc to win the White House in 2016.

The bulk of the financing for the plan — $210 billion — would come from a capital-gains tax hike and a change in the way the tax code treats the appreciated value of inherited assets.

Under the plan, inherited assets would be taxed according to their value when they were bought. That means the capital gains on those assets during a person’s lifetime, now shielded from taxation, would be subject to tax at the time of the bequest.

The plan, which does not apply to charitable gifts, would fall almost entirely on the top 1 percent of taxpayers, administration officials said. It would apply to capital gains of $200,000 or more per couple, with another $500,000 exemption for personal residences.

The remaining $110 billion to pay for Obama’s new tax plan would come from a fee imposed on the largest and most highly leveraged financial firms.

That proposal, administration officials said, was designed to make “risky activity” more costly for the roughly 100 such companies in the nation with assets more than $50 billion. Those companies would be assessed a fee based on the amount of debt they hold.

White House officials estimated that the new $500 “second-earner” tax credit would benefit 24 million households.

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