Obama urges taxing rich, aiding housing in State of the Union

US President Barack Obama called on Tuesday for higher taxes on the rich and new remedies for the US mortgage crisis in a starkly populist State of the Union address aimed at convincing voters to give him a second term.

Speaking to Congress and beyond them to the broader electorate, Obama proposed sweeping changes in the tax code -- most notably, a minimum 30 percent effective rate on millionaires -- to eliminate inequalities that allow the wealthy to pay lower rates than the middle class.

While the biggest proposals in Obama's election-year speech are considered unlikely to gain traction in a divided Congress, the White House believes the president can tap into voters' resentment over Wall Street excesses and Washington's dysfunction.

Obama's message could resonate in the 2012 campaign following the release of tax records by Mitt Romney, a potential Republican rival and one of the wealthiest men to ever run for the White House. He pays a lower effective tax rate than many top wage-earners.

A new proposal outlined by Obama to ease the way for more American homeowners to get mortgage relief -- and to pay for the plan with a fee on banks blamed for helping create the housing crisis -- also struck a strong note of populism.

"Millions of Americans who work hard and play by the rules every day deserve a government and a financial system that does the same," Obama told a joint session of Congress. "It's time to apply the same rules from top to bottom."

Taxes are the most divisive issue at the heart of this year's presidential campaign when Obama is seeking re-election despite a slow economic recovery and a high jobless rate.

Democrats have hammered Republicans in Congress for supporting tax breaks that favor the wealthy while Republicans staunchly oppose tax hikes, even on the richest Americans, arguing they would hurt a fragile economic recovery.

House of Representatives Speaker John Boehner, the top congressional Republican, accused Obama beforehand of promoting the "politics of envy" and insisted the election would be a referendum on the president's "failed" policies.

The US unemployment rate was 8.5 percent in December. No president in the modern era has won re-election with the rate that high.

Obama used the speech to revive his call to rewrite the tax code to adopt the so-called "Buffett rule," named after the billionaire Warren Buffett, who says it is unfair that he pays a lower tax rate than his secretary.

Those making more than $1 million a year would pay a minimum effective tax rate of at least 30 percent and their tax deductions would be elimiated under Obama's plan.

To underscore Obama's point about tax inequality, Buffett's secretary, Debbie Bosanek, was to be seated in the first lady's box in the House of Representatives for Obama's annual address.