State of the Union Address: Obama Wants to Raise Taxes on Wealthy to Finance Tax Credits

President Obama wants to increase taxes on top earners which will include investment tax rates so that the government can fund new tax credits and other measures that he thinks will help the middle class. Included in his proposal is the removal of tax break on inheritances.

He will have a hard time with this since the Republican-controlled Congress are opposed to any tax raise since they claim that any tax increase will negatively affects economic growth at a time the U.S. cannot afford it.

Whitehouse believes that the new tax raise if implemented would raise $320 billion over the next decade, while adding new provisions cutting taxes by $175 billion over the same period. It will also fund the free community college for 2 years that is expected to cost $60 billion over 10 years.

Obama wants to end the “trust-fund loophole” on inheritances that save billions of dollars from taxation yearly. This will require estates to pay capital gains taxes on securities at the time they're inherited. It would also raise the top capital-gains tax rate to 28% (from 23.8%) for family with an annual income of above $500,000.  Banks with assets over $50 billion will be taxed and the fund will be used to finance tax incentives for middle-income earners, which includes $500 credit for families in which both spouses work, additional child care and education credits and incentives to save for retirement.

Republican leaders said they also wanted to reform the country's complicated tax code, however they don't agree with most of the proposals the president will outline on Tuesday. For example, most Republicans want to lower or eliminate the capital gains tax and similarly want to end taxes on estates, not expand them.

Republicans support the fee on the banks with more than $50 billion assets. This new fee is the same proposal from former Republican Rep. Dave Camp of Michigan, who led the tax-writing Ways and Means Committee. Camp's plan, however, was part of a larger proposal to lower the overall corporate income tax rate.

If it would help the working middle-class and not the lazy-class, I'm all for it. 

Chao: Health Insurance Marketplace is Still Incomplete

Henry Chao the deputy chief information officer at the Centers for Medicare and Medicaid Services said that the federal health insurance marketplace is not yet complete. He said that they are still building the “back office systems." 

“we still have to build the financial management aspects of the system, which includes our accounting system and payment system and reconciliation system,” he said. "This part is still being developed and will be tested."

He admitted Tuesday that up to 40 percent of IT systems supporting the exchange still need to be built.

The Obama government completed the online system which allowed consumers to apply for insurance, compare health plans and enroll however, many parts of the system were still being repaired and were not performing as well as they had hoped.

“It’s not that it’s not working,” Chao told lawmakers at an Energy and Commerce Oversight and Investigations subcommittee hearing. “It’s still being developed and tested.”

Financial management tools are not yet done, he said, particularly the process that will deliver payments to insurers.

Obamacare supporters admit insurance premium will rise

The federal health law that will take effect next year is expected to raise insurance premiums, especially for people who purchase their own insurance, expert said.

The law will mandate that plans increase their minimum benefits, and it will ban insurers from weeding out people already diagnosed with illnesses.

Health and Human Services Secretary Kathleen Sebelius said to reporters that "Some people purchasing new insurance policies for themselves this fall could see premiums rise because of requirements in the health-care law."


Her remarks come weeks before insurers are expected to begin releasing rates for plans that will start on Jan. 1, 2014, when key provisions of the health law kick in.

Some insurers have already begun signaling that they could dramatically increase prices for people buying policies in the individual market to compensate for restrictions on how they treat consumers, as well as new fees and requirements that they provide bigger benefits packages, reported by The Wall Street Journal last week.

The Society of Actuaries also issued a warning that the cost of medical claims in the new individual-insurance market could rise by an average of 32% per person over the first few years the law is in place.