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Pulling back the curtains on wage-theft enforcement in MN; Trump's latest attack is on RFK, Jr; NM LGBTQ+ equality group endorses 2024 'Rock Star' candidates; Michigan's youth justice reforms: Expanded diversion, no fees.

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Transportation Secretary Pete Buttigieg says rebuilding Baltimore's Key Bridge will be challenging and expensive. An Alabama Democrat flips a state legislature seat and former Connecticut senator Joe Lieberman dies at 82.

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Pres. Obama's Tax Proposal: Middle Class Wins?

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Wednesday, January 21, 2015   

WASHINGTON - Income inequality was one of the topics in President Obama's State of the Union address last night. He's proposing a change in tax code so the wealthiest people are not treated differently when it comes to capital gains.

Federal tax policy director Chuck Marr, at the Center on Budget and Policy Priorities, explains the current tax code is tilted in favor of accumulating wealth through capital gains because taxes on the gains can be deferred. He says that isn't the situation for most working Americans.

"Obviously, for middle-class people, you don't put your taxes on a tab and have them wiped out when you die," says Marr. "You pay them every year. So, that's what the President's getting at, that's the main change."

Critics have called previous proposals to close the loophole "death taxes," because the gains would be paid when a person dies rather than being erased. Although Marr says that's a catchy phrase, it deflects from issue of tax fairness.

Marr says most Americans who can save for retirement do so through savings plans that have strict tax rules, and they are taxed even when capital gains are realized through those plans. That's where Marr points out the "unfairness" becomes clear.

"This is very different treatment for very wealthy people that these capital gains are forgiven," he says. "But the more people understand it, they're like, 'Wow, how can someone's taxes for their whole life just be wiped out?'"

Marr adds, even people who feel they are pretty well-off are not the ones who would be affected by this change. He says it's the 400 richest Americans, out of 300 million who live in the country, who would pay more if the loophole was closed; those 400 hold one of every $6 in capital gains.


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