President Obama’s latest tax package, which he’ll unveil in detail next week along with his new budget, would lower taxes for low-income households and significantly raise taxes for the highest income 1 percent—those making $663,000 or more, according to new Tax Policy Center estimates.  Middle-income households would see relatively modest changes in their tax bills. On average, in 2016 households making $25,000 or less in expanded cash income could expect an average boost in after-tax income of 1.2 percent, or about $175, while those in the top 1 percent would see their after-tax income fall by an average of 2 percent, or about $29,000. Those in the top 0.1 percent—who make at least $3.4 million—would see their after-tax income cut by about 2.6 percent, or about $168,000 on average. [[{"type":"media","view_mode":"default","fid":"128466","attributes":{"class":"media-image size-full wp-image-7740 aligncenter","typeof":"foaf:Image","style":"","width":"580","height":"401","alt":"SOTU-tax-provisions[3] copy"}}]] Obama’s tax plan, which was first described in a fact sheet that accompanied his State of the Union address, would raise taxes on capital gains, impose a new tax on big financial institutions, limit the size of tax-advantaged retirement accounts, and eliminate the tax benefits of Sec. 529-like college savings plans. (The administration announced yesterday that they would drop the 529 proposal.) At the same time, it would expand the Earned Income Tax Credit and the Child and Dependent Care Tax Credit, increase other subsidies for higher education, and create new auto-IRA retirement savings plans. The TPC estimates include all of the provisions of the Obama plan except for changes in flexible savings accounts for child care and Sec. 529 plans. The proposal would have very little net impact on middle-income households. For example, those making between $49,000 and $84,000 (the middle 20 percent of households) would see their after-tax incomes fall--by an average of $7. Those making between $84,000 and $142,000 would take home 0.1 percent more, or about $50. Unlike those at the bottom, where only 5 percent of households would get a tax hike, and those in the top 1 percent, where 99.6 percent would see their taxes rise, there would be a wide range of winners and losers in the middle. Among those making between $49,000 and $84,000, about one-quarter would get a tax cut (averaging about $550) and about half would get a tax hike (averaging about $290). The main reason for that tax increase: TPC distributes a share of the new bank tax—like all corporate taxes—among workers. Without that tax hike, only about 6 percent of middle-income households would pay more under the Obama plan though their average tax increase would be about $2,100. TPC’s distributional estimates are based on very brief descriptions that accompanied Obama’s State of the Union address. We plan to publish more detailed tables soon and perhaps revise these once we learn more about his ideas. Both critics and supporters describe the Obama plan as a major redistribution of income through the tax code. In reality, it would significantly boost taxes on the rich and only modestly cut them for many low income households, though for some, especially those with young children, the boost in after-tax income would be substantial. For most of the rest of us, the net impact would be relatively small though some people would enjoy hefty tax cuts and others would face big tax hikes.