President Obama gives his State of the Union Address tonight, but the White House has already revealed one of the key proposals to be offered up in the speech: Kicking up the capital gains tax rate for couples earning more than $500,000 annually.
An unnamed “senior administration official” told CNN that the proposal has “clear congressional bipartisan support.” The official probably did not want to be identified to avoid being laughed out of every bar and dining room in Washington. Brendan Buck, a spokesman for Republican House Ways and Means Committee Chairman Paul Ryan -- who was apparently happy to be named – declared the tax proposal not serious.
“We lift families up and grow the economy with a simpler, flatter tax code, not big tax increases to pay for more Washington spending,” Buck told CNN.
Ryan’s mouthpiece makes it sound as though the billions of new tax dollars the president’s plan would bring in over the next 10 years would all be spent on buying McMansions for welfare queens and Cadillacs for park rangers. Actually, most of the money would go to a $500 tax credit for married couples who are both employed, an increase in the tax credit for child care and consolidation of education tax provisions. In all, the administration claims close to 40 million families would benefit.
Call him crazy, but Obama thinks it would be good to give a little help to the middle class and working poor by capturing a bit more of the enormous wealth being generated on Wall Street and sending it their way. In addition to upping the top capital gains rate to 28%, he would close the “trust fund loophole” that allows securities to go untaxed at the time they are inherited. Obama would also slap a fee on U.S. financial firms with assets greater than $50 billion.
White House folks are eager to note that raising the capital gains tax rate would simply take it back to the level at which it was pegged during the Reagan presidency. But even invoking the name of the GOP’s sainted leader is not likely to get Republicans to do the one thing they all are eternally pledged not to do: raise a tax.
Their opposition matters more than ever, of course, because Republicans now dominate both houses of Congress. It is hard to imagine the Obama scheme even getting brought up for a vote in a subcommittee. Though some potential Republican presidential candidates -- including Mitt Romney, of all people -- are bemoaning the increasing wealth gap in the country, the idea of helping to close that gap by making the wealthy pay a bit more is not a popular idea in the party. You would probably find more Muslims who like cartoons of Muhammad than GOP-elected officials who think the rich need to fork over more money to the federal government.
There is a lot of talk that reforming the tax code may be one issue on which congressional Republicans and the president can find common ground. Even that modestly cheery possibility, though, seems remote. Though both sides would like to tinker with the tax code to give some relief to the middle class, Obama and the Democrats want to pay for it by making those at the very top of the economic ladder share a slightly larger piece of their vast wealth. Republicans don’t want to make up for lost revenues at all, unless it is by squeezing government programs such as food stamps and environmental protection even more than they have been.
What is the state of the Union? Polarized.