Obama Proposes $320 Billion Tax Hike for the Top 1 Percent

President Obama will outline an ambitious plan for tax increases on investments.

President Barack Obama will propose a $320 tax hike meant to combat economic inequality at his State of the Union Address on Tuesday. He spoke about raising the minimum wage at the University of Michigan in Ann Arbor on April 2, 2014. Jewel Ssmad/AFP/Getty Images

President Obama will outline an ambitious plan for tax increases on investments, inherited assets, and financial firms in his State of the Union address that would fund tax breaks for middle-class families.

The administration said the plan would generate $320 billion in revenue over the next decade, the bulk of which would come from eliminating the “step-up in basis” estate tax provision.

Tax Increase

The step-up in basis means that current law, heirs who sell inherited assets have to pay capital gains taxes on the rise in value of that asset after it was inherited, and not its appreciation over the time it was owned by the bequeather. For instance, if an investor leaves a stock to an heir that rises from $2 to $50 while he owns it, and it rises from $50 to $55 before it’s sold by the heir, only $5 is taxed as a capital gain.

Obama’s proposed new rules would tax all of the $53 of appreciation.

According to a 2013 estimate by the Joint Tax Committee, $258 billion in tax revenue would be lost from fiscal years 2013 to 2017 because of the step-up in basis provision.

Much of the revenue would finance education reform and a series of tax relief programs for American families.