In Tuesday night’s State of the Union address, President Obama will propose what Time called a “scaled back” plan for tax reform that includes cutting trust fund loopholes to help the middle class.
The trust fund loophole allows the wealthy to avoid certain taxes when their money is passed on to heirs. Obama’s address will reportedly call for the loophole to be closed, and will also propose an increase in the capital gains tax rate for high-income households. The rate would be increased to 28 percent.
Obama’s proposal is part of an effort to expand tax credits for the middle class. According to Politico, the proposed tax benefits would cost $175 billion over the course of 10 years, in addition to the $60 billion free community college proposal that Obama will also outline Tuesday.
The Obama administration assured that despite the price of the tax benefits, the closing of the trust fund loophole in addition to a new bank liability fee would cover it. The 0.07 percent liability fee would be imposed on the nearly 100 banks with more than $50 billion in liabilities.
The reforms would raise nearly $320 billion over the next decade.
“That is more than enough resources to cover the cost of the new tax proposals that we’re outlining today, as well as the cost of middle-class proposals like the free community-college proposal,” an administration official said.
The President would use the revenue to give a $500 tax credit for dual income families, provide a $3,000 child-care credit per child, and pay for his community college initiative, which would allow students to attend two years of community college for free.
Another Obama official said the President would use his proposal to “lay out a vision for what are the steps that we need to take, we as a country, what are the choices that we need to make, that are going to make sure that this prosperity is shared by the middle class as we look to expand the middle class.”
A financial breakdown of Obama’s proposal will reportedly be included in his budget, which is set for release on Feb. 2nd.