President Barack Obama’s new tax plan ran into rapid criticism from the Republicans on Sunday, underscoring the challenges facing any attempt to overhaul the U.S. tax code.
With the start of a new Congress this month under Republican control, lawmakers have been discussing tax reform. However, with Congress deeply divided on fiscal policy, Obama’s latest tax plan is likely to hit strong opposition.
Unable to compromise over taxes and spending, Washington has not thoroughly revamped the code in 28 years, although it is commonly acknowledged that the tax code is riddled with loopholes and does not raise enough revenue to pay the country’s bills.
Ahead of Obama’s State of the Union address on Tuesday, senior administration officials said on Saturday the Democrat president will call for new taxes on the wealthy and on Wall Street banks, both Republican constituencies.
Obama proposes raising the top tax on capital gains to 28 percent from 23.8 percent, while also shutting down a loophole that lets the heirs of large estates avoid paying the full capital gains tax on assets they inherit.
He also proposes imposing a fee on the liabilities of the nation’s largest roughly 100 financial firms.
“The president needs to stop listening to his liberal allies who want to raise taxes at all costs and start working with Congress to fix our broken tax code,” said Republican Senator Orrin Hatch, the Senate’s top tax law writer.
Obama’s proposals would slap tax hikes on “small businesses, savers, and investors,” Hatch said in a statement.
Congressional Republicans are circulating plans to cut taxes on businesses by, for instance, repealing a tax on medical device manufacturers that was imposed under Obama. Another Republican plan would cut the overall tax rate on businesses.
Obama will also propose a handful of tax measures to help middle-class families with costs for college and child care, as well as new retirement savings options.