Tax and economic reforms are on the President’s agenda for 2015 as he seeks to close what he terms “unfair loopholes that are only available to the wealthy and big corporations” (perhaps another inappropriate use of the term “loophole”).
Forbes recently detailed some of the key proposals from the President in its article titled “President's New Tax Proposal Would Hit Wealthy, Benefit Middle Class.” The highlights include these provisions:
Eliminating stepped up basis. The President says that this is “the single largest capital gains tax loophole.” He proposes to eliminate stepped up basis at death, in which heirs are allowed to use the date of death value of capital assets instead of the decedent’s actual basis for capital gains calculations.
Raising capital gains and dividend rates. In order to spur investment activity, the capital gains and dividends rates have been decreased over the past 30 years. The President’s plan would up those rates to 28% for high-income taxpayers.
A new tax credit for double-income families. The President proposes providing a tax credit of up to $500 for families with two working spouses equal to 5% of the first $10,000 of earnings for the lower-earning spouse in a married couple. The maximum credit would be available to families with incomes up to $120,000, with a partial credit available up to $210,000.
Upping child care tax incentives. The President proposes to increase the child care tax credit, or the dependent care tax credit, to $3,000, but only for middle class families with children under five.
New education tax benefits. Combining some of the existing education tax benefits is part of Obama’s strategy. A move that would conceivably permit more students up to $2,500 in tax breaks each year over five years. The Lifetime Learning Credit and the tuition and fees deduction would be cut and replaced by an expanded American Opportunity Credit (AOC). The refundable part of the AOC would also be increased.
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Reference: Forbes (January 17, 2015) “President's New Tax Proposal Would Hit Wealthy, Benefit Middle Class”