the WHITE HOUSEPresident Barack Obama

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This Is How the President Is Making the Tax Code Work for Middle-Class Families

Summary: 
President Obama announced his plan to eliminate loopholes that let the wealthiest and big corporations avoid paying their fair share in taxes, and to invest those savings to help middle-class families strengthen their standing in the 21st-century economy.

At the heart of America's economic resurgence stands the grit and resilience of America's middle class. It's what has fueled our economic comeback and will help ensure that all Americans -- not just a fortunate few -- benefit from the progress we've made since the Great Recession. 

Thanks to the hard work of the American people and the policies that President Obama has pursued, we have rebuilt our economy on a foundation of what works: middle-class economics. 

A key pillar of this foundation is ensuring a simpler, fairer tax code that invests in middle-class families. So, ahead of the State of the Union address on January 20, President Obama announced his plan to eliminate loopholes that let the wealthiest and big corporations avoid paying their fair share in taxes and invest those savings to help middle-class families strengthen their standing in the 21st-century economy.

Here's what the President will reform: 

  • The Trust Fund Loophole: The single-largest capital gains loophole, the Trust Fund loophole lets hundreds of billions of dollars escape taxation each year. The President wants to close this loophole to ensure the wealthiest Americans pay their fair share on inherited assets.
  • The Top Capital Gains Rate: The President will return the top capital gains rate -- or the rate at which the value of a capital asset like an investment or real estate property is taxed -- back to 28 percent, the rate under President Ronald Reagan.
  • Fair Share from the Biggest Financial Firms: The President will continue to reform the way the largest financial firms do business by proposing a fee on the biggest financial firms, making it more costly for them to borrow heavily.

Here's what the President will do with the savings from these reforms:

  • Help Working Families: The President will lay out a new $500 second-earner credit to help cover the additional costs faced by 24 million families where both spouses work.
  • Address the Cost of Child Care: The President is proposing to triple the child care tax credit to $3,000 per child under 5, which would help 5.1 million families cover child care costs for 6.7 million children.
  • Make College Accessible and Affordable: The President's plan reforms the education tax system by consolidating six overlapping education provisions into just two, and providing students up to $2,500 a year toward completing a college degree. His proposal cuts taxes for 8.5 million families and students, and simplifies taxes for the more than 25 million families and students that claim education tax benefits.
  • Help Americans Save for Retirement: The President's plan makes it easy and automatic for workers to save for retirement -- giving 30 million more workers the opportunity to easily save for retirement through their employer.

Learn more about President Obama's plan to create a fairer tax code for working families here.