In addition to President Obama's push for corporate tax reform, the priorities outlines in his state of the union address could have a significant impact on the finances of millions of American taxpayers. But, hey, the good news is President Obama is thinking “tax reform.” Let’s keep our fingers crossed that something substantive can be done to fix our broken tax system.
He hit several broad themes including, curtailing government spending, revising the tax code, and promoting clean energy and education initiatives.
Although many programs lacked specifics, here are some of the key proposals and how they might affect your household finances.
—Obama: "To compete, higher education must be within the reach of every American....And this year, I ask Congress to go further, and make permanent our tuition tax credit — worth $10,000 for four years of college."
—Where we are: Obama proposed last year making the American Opportunity Tax Credit permanent but Congress didn?t act. It will expire after 2012 if not made permanent.
—Impact: Program provides a tax credit of up to $2,500 for each of the four years of college. About 9.4 million families will claim the credit this year.
— Obama: "The health insurance law we passed last year will slow these rising costs, which is part of the reason that nonpartisan economists have said that repealing the health care law would add a quarter of a trillion dollars to our deficit."
— Where we are: Rising health care costs are a serious threat to retirees maintaining a pre-retirement lifestyle. A 65-year-old couple retiring in 2010 needed an estimated $250,000 for medical expenses through their retirement, said a study by Fidelity Investments.
— Impact: Studies show retired workers are bearing a significant portion of their medical expenses. More than half of retirees surveyed by Fidelity are paying out-of-pocket for health care costs not covered by Medicare, and 44 percent said health care costs are having a negative effect on their retirement budget.