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Tax Policy Center: Tax Proposals in the 2013 Budget

Authors: Eric Toder, Roberton Williams, and Joseph Rosenberg
March 21, 2012

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The Urban-Brookings Tax Policy Center examines and comments on the tax proposals as laid out in President Obama's 2013 budget.

The Tax Policy Center has examined the key tax proposals in President Obama's 2013 budget. Separate discussions below describe each of the proposals including current law, proposed changes, and, when appropriate, the distributional effects. The budget as presented by the president lacks complete details on many of the tax proposals. Some provisions had virtually no detail, and our discussion of them is necessarily limited.

The budget assumes a baseline in which the 2001–03 tax cuts are permanently extended for all taxpayers, the estate tax applies at its 2012 level, and parameters for the alternative minimum tax (AMT) are permanently indexed for inflation from their 2011 levels. Those provisions would reduce revenues (or increase spending) by $4.5 trillion from 2013 through 2022.

Relative to that baseline, the president's proposals would raise an additional $1.7 trillion in revenue (net of outlays for refundable credits) over the coming decade. That revenue gain is composed of two kinds of tax change: about $400 billion in revenue lost to a variety of tax reductions and $2.1 trillion in added revenue from tax increases (table 2). About $160 billion of the tax cuts would result from making permanent provisions in the 2009 stimulus act mostly for low- and middle-income households and another $160 billion would be due to various business tax cuts. The remaining $100 billion of cuts would fund, among other things, the last three months of the 2012 payroll tax reduction and extension of various expiring provisions. On the revenue-increase side, about 40 percent of additional revenues would result from not extending the 2001-03 tax cuts for high-income households, about 28 percent from limiting the value of itemized deductions to 28 percent (affecting only high-income taxpayers), about 18 percent from various income tax increases on businesses, and the balance from miscellaneous tax increases.

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