President Obama urged the Republican-dominated Congress to move ahead on tax reform to lower taxes on middle-class families during his State of the Union address on Tuesday evening.

Obama avoided laying out the details of the tax reform plan that the White House previewed over the weekend, which would raise taxes on upper-income taxpayers, trust funds, capital gains and financial transactions (see Obama Proposes Tax Increases on Wealthy to Aid Middle Class). However, he argued for broader tax reforms that would help families with needs such as childcare as part of the budget that the administration will propose in the next few weeks. 

“Middle-class economics means helping working families feel more secure in a world of constant change,” he said. “That means helping folks afford childcare, college, healthcare, a home, retirement—and my budget will address each of these issues, lowering the taxes of working families and putting thousands of dollars back into their pockets each year.”

“It’s time we stop treating childcare as a side issue, or a women’s issue, and treat it like the national economic priority that it is for all of us,” he added. “And that’s why my plan will make quality childcare more available, and more affordable, for every middle-class and low-income family with young children in America—by creating more slots and a new tax cut of up to $3,000 per child, per year.”

Obama emphasized the country's economic growth in recent years and the recovery since he took office in the depths of the recession, while also pointing to the income inequality that has become more pronounced amid stagnant wages for many Americans. He urged Congress to move ahead on tax reform, as he traditionally does in his State of the Union address, although he admitted his tax reform priorities do not match the Republican majority's.

“Now, the truth is, when it comes to issues like infrastructure and basic research, I know there’s bipartisan support in this chamber,” he said. “Members of both parties have told me so. Where we too often run onto the rocks is how to pay for these investments. As Americans, we don’t mind paying our fair share of taxes, as long as everybody else does, too. But for far too long, lobbyists have rigged the tax code with loopholes that let some corporations pay nothing while others pay full freight. They’ve riddled it with giveaways the superrich don’t need, denying a break to middle-class families who do.”

As in his speech last year, Obama again asked Congress to end tax breaks for companies that shift their tax addresses and profits abroad. “Let’s close loopholes so we stop rewarding companies that keep profits abroad, and reward those that invest in America,” he said. “Let’s use those savings to rebuild our infrastructure and make it more attractive for companies to bring jobs home. Let’s simplify the system and let a small business owner file based on her actual bank statement, instead of the number of accountants she can afford. And let’s close the loopholes that lead to inequality by allowing the top one percent to avoid paying taxes on their accumulated wealth. We can use that money to help more families pay for childcare and send their kids to college. We need a tax code that truly helps working Americans trying to get a leg up in the new economy, and we can achieve that together.”

The President also issued a number of proposals that the White House has highlighted in the weeks leading up to the speech, including free community college tuition and paid sick leave for workers. In discussing international affairs, he called on Congress to pass a resolution authorizing the use of force against ISIL. He also highlighted the pressing need to do more to combat climate change and pointed to a recent agreement between the U.S. and China on limiting greenhouse gas emissions.

In the Republican response, freshman Senator Joni Ernst, R-Iowa, agreed on the need for tax reform, although without raising taxes. "Let's simplify America's outdated and loophole-ridden tax code,” she said. “Republicans think tax filing should be easier for you, not just the well-connected. So let's iron out loopholes to lower rates and create jobs, not pay for more government spending.”

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