Earlier this week, President Obama took to the podium to deliver his penultimate State of the Union Address. Every president announces a variety of initiatives and proposals for their year in office. However, for the first time in his presidency, Obama delivered his address to an auditorium of new Republican control of Congress. In case you missed it, here are the cliff notes from his economic proposal ideas and their potential impact on you:
- Increased Capital Gains Tax: Obama has proposed an increase in capital gains tax to 28% for households earning more than $500,000 annually. With the current top rate at 20% + 3.8% Medicare surtax, this would be an increase of a little more than 4% for many of those households. This continues his theme of everybody contributing their “Fair Share” when it comes to taxes.
- Estate Tax “Loopholes”: The President also has taken aim at some loopholes in the estate tax system that could add revenue through taxation. Currently when the decedent passes, their estate receives a “step-up” in basis as of the date of death. The cost basis on such assets “step-up” to the value as of their date of death, thus avoiding capital gains taxes upon inheritance. The President’s proposal is aimed to tax the inheritance at capital gains rates which would eliminate the “step-up” provision.
- Child Dependent Care Credit: To alleviate some of the pressure on dual income households, the President is proposing a $3,000 tax credit for qualifying individuals that have children in dependent care. This would be a credit per child which is aimed at lowering the tax burden on middle-class homes with two family members that work.
- Free Community College: In today’s economy, most jobs now require some form of higher educational training. In order to meet this demand, the President is proposing free community college for qualified individuals so long as they keep their grades up (2.5 GPA) and graduate on time. This is estimated to cost $60 billion over the next 10 years all financed by the increase in capital gains rates for wealthy Americans.
- Seven Days of Paid Sick Leave: It is estimated that 43 million American workers do not have any form of sick leave from their employer. As part of the Healthy Families Act, President Obama proposed making it a requirement for employers to provide seven days of paid sick leave.