President Barack Obama will propose a new tax plan during Tuesday's State of the Union address aimed at simplifying the current tax code for individuals and eliminating loopholes for the benefit of the middle class.

Ahead of Tuesday's State of the Union address, the White House published a Fact Sheet titled "A Simpler, Fairer Tax Code That Responsibly Invests in Middle Class Families," which noted middle class families have "too much of the tax burden" as a result of unfair loopholes for the wealthy and big corporations.

Obama's tax reforms are aimed for the wealthiest from avoiding their tax payments. One plan is to close the trust fund loophole, which is considered as "the single largest capital gains tax loophole - to ensure the wealthiest Americans pay their fair share on inherited assets."

"Hundreds of billions of dollars escape capital gains taxation each year because of the 'stepped-up' basis loophole that lets the wealthy pass appreciated assets onto their heirs tax-free," said the White House.

Top capital gains will be raised while the dividend rate is proposed to be scaled back to rates since President Ronald Reagan's era. Obama also wants a fee on "large, highly-leveraged" financial firms in hopes to discourage excessive borrowing and careful decisions. The Fact Sheet identified such large firms as having assets worth more than $50 billion.

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The White House claimed the tax reforms will help other programs benefiting the middle class such as the recent proposal for free two years of community college for students. In addition, Obama will propose a new $500 second earner credit for families, which could benefit approximately 24 million couples. Middle class families with young children could receive a tax cut of up to $3,000 per child under 5 years old.

"The problem is that the U.S. capital income tax system is too broken to address this unfairness just by raising tax rates," says the White House. "Current rules let substantial capital gains income escape tax altogether. Raising the capital gains rate without also addressing these loopholes would encourage wealthy individuals to take further advantage of the opportunities the current system provides to defer and avoid tax."

The Obama administration claimed the tax proposals would affect "almost exclusively" to the top 1 percent, or those with incomes over $2 million.

Obama's tax reform proposals also affect retirement plans. The president seeks to expand access to employer-based retirement savings options, which could give 30 million more workers access to employment-based savings opportunities. Obama's plan is for every employer with more than 10 employees - without a retirement plan - to automatically enroll in an IRA, although workers will have the option to opt out.

"Rather than make it easier for middle-class families to make ends meet, our tax system has changed over time in ways that make it easier for the wealthy to avoid paying their fair share. Though President Obama restored top tax rates on the highest income Americans to their levels under President Clinton, high-income tax rates remain historically low, especially on capital income," the White House added.

Obama will deliver the annual State of the Union address on Tuesday night, at 9 p.m. EST.

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