Highlights of Obama plan to tax wealthy, spend additional revenue on middle class

Lifestyle and Budget Associated Press

The White House says President Barack Obama will propose in his State of the Union address a plan to impose higher taxes on the wealthy and use the revenue to help middle-class families. Congress would have to agree, and lawmakers have rebuffed Obama's earlier proposals to eliminate certain tax provisions and spend the money on road and bridge repair, for example.

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OBAMA'S TAX PROPOSALS

— Eliminate a tax break on inheritances. The White House says the provision costs the government hundreds of billions of dollars in annual tax revenue.

— Increase the total top capital gains rate on couples with incomes above $500,000 to 28 percent, what it was under President Ronald Reagan. The top capital gains rate has already been raised from 15 percent to 23.8 percent during Obama's presidency.

— Impose a fee on big financial firms, those with assets of more than $50 billion. The White House said the idea is in line with a proposal that was in a comprehensive tax overhaul plan unveiled during the previous session of Congress by then-Rep. David Camp, R-Mich., at the time the chairman of the tax-writing House Ways and Means Committee.

Raising the capital gains rate, ending the break on inheritances and imposing a fee on financial firms would generate $320 billion in revenue over a decade, according to administration estimates.

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HOW OBAMA WOULD SPEND THE MONEY

— A new $500 "second earner" tax credit for families where both spouses work. An estimated 24 million couples would benefit; the credit would apply to families with annual income up to $210,000.

— Expand the child care tax credit to up to $3,000 per child under age 5. The administration says the proposal would help more than 5 million families pay for child care.

— Consolidate six overlapping education tax breaks into two. Republicans have been open to the idea of streamlining education tax breaks.

— Expand the Earned Income Tax Credit to workers without children and to noncustodial parents.

— Boost retirement savings by automatically enrolling in an Individual Retirement Account people who don't have access to a workplace retirement plan, and expand access to employer retirement plans for certain part-time workers.