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Inside Obama’s middle class tax plan

President Obama will reportedly unveil a plan to offer tax relief for the middle class during his State of the Union address on Tuesday night. The plan would be paid for by increasing taxes the rich pay on investments and inherited property. For more, Carol Lee of the Wall Street Journal joins Hari Sreenivasan from Washington.

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  • HARI SREENIVASAN:

    Good everything. Thanks for joining us.

    President Obama reportedly will unveil a plan to offer tax relief for the middle class during his State of the Union address Tuesday night. The plan would be paid for by increasing taxes the rich pay on investments and inherited property.

    For more about the president's proposal, its chances of success, and its political impact, we're joined now from Washington by Carol Lee. She is White House correspondent for The Wall Street Journal.

    So, Carol, who does the administration say that this will help, and how?

  • CAROL LEE, The Wall Street Journal:

    Their main target is the middle class.

    And they — their argument is that it will help the middle class by taking — closing certain tax loopholes that they say benefit the top 1 percent of Americans and making different changes to the tax code, including raising the capital gains tax from 23.8 percent to 28 percent by, as you mentioned, taxing some of these investments and assets that people transfer to their children that currently are not taxed and a number of other things.

    And what they do with that money, which is roughly several hundred billion dollars, is put it towards proposals such as tripling the child tax credit. So, that would go from $1,000 to $3,000. They're proposing to create a new tax credit for households where both spouses work.

    And they would — the president has unveiled a proposal to offer free community college for folks. And that's another thing that — that this would pay for. And so it's kind of — it's basically the president's opening bid on a number of tax issues that have been vexing Washington for a long time.

    And, so far, it has not gotten a very warm reception from Republicans. But the White House's argument is that this would help the middle class, the Republicans say that they are now focused on the middle class, the economy is doing better, and so now is the time to do things — things — take steps like this.

    And while conceding that they probably won't get everything that they want, which is a very optimistic view of this package, given the response we have seen from Republicans, the hope is that this is an opening bid to what the White House hopes are broader negotiations on some of these individual tax code issues.

  • HARI SREENIVASAN:

    Right.

    So, what the political implications, even if it can't get through Congress?

  • CAROL LEE:

    Well, it sets the parameters of the debate for 2015, which is turning into 2016.

    And the two things that the parties have agreed on — and you have seen this in a number of potential Republican presidential candidates, you have heard it from former Secretary of State Hillary Clinton, and the White House is really pressing on this issue — is that the middle class is need — in need of help, and that wages are stagnant, and while GDP is growing and unemployment rate is at new lows, the middle class is still really struggling and requires some targeted measures to try and build them up.

    And so what you're going to hear the White House and Democrats do when they get with these measures, this package that the president is going to roll out on Tuesday in his State of the Union address, is put the ball in Republicans' court to say, OK, well, what are your proposals? What do you — what do you want to do? And if you don't support this, then what do you support?

    And so it's the — it's designed to, even if it doesn't pass, move the debate along to where the two sides are having to stake out their territory ahead of the 2016 election.

  • HARI SREENIVASAN:

    All right, Carol Lee, joining us from Washington from The Wall Street Journal, thanks so much.

  • CAROL LEE:

    Thank you for having me.

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