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tax topics
 

Analysis of
Previous Budgets

2010 Budget
2011 Budget

Tax Proposals in the 2012 Budget

The Tax Policy Center offers the table below as a guide to the tax provisions of President Obama’s 2012 budget. Subsequent pages provide detailed descriptions and brief commentaries on each provision. Linked tables show the distributional effects of the overall proposal and of major elements of the plan. Continue to introduction and summary 


Download complete analysis in PDF format                   View distribution tables 

 2012 Budget

Provisions Affecting Only Highest Income Taxpayers *

Allow 2001-03 Tax Cuts to Expire and Tax Qualified Dividends like Long-Term Capital Gains

Allow top two rates to rise to 36% and 39.6% after 2012

 

Allow the personal exemption phaseout (PEP) and limitation on itemized deductions (Pease) to return after 2012

Tax net long-term capital gains at a 20% rate

Tax qualified dividends at a 20% rate

Limit the value of itemized deductions to 28 percent

Other Major Provisions Affecting Individual Taxpayers

Extend the 2001 and 2003 tax cuts for taxpayers at incomes below certain thresholds

 

Index to inflation the 2011 parameters of the individual alternative minimum tax

Tax carried interest as ordinary income

Expand the child and dependent care tax credit

Extend the earned income tax credit for larger families

Extend the American Opportunity tax credit

Require automatic enrollment in IRAs and
enhanced small employer startup credit
 

Extend 2009 estate and gift tax parameters
and other estate tax reforms

Business Tax Provisions

Business Tax Incentives

 

Business Tax Increases and
Elimination of Preferences

Make the research and experimentation credit permanent

Eliminate fossil fuel tax preferences

Increase credits for energy-efficient investments

Impose a financial crisis responsibility fee

Provide new tax incentives for regional growth

Reform international taxation rules

Eliminate taxation of capital gains
on qualified small business stock

Reform treatment of insurance companies and products

Revise tax treatment of inventories

Other Revenue Proposals

Reinstate superfund taxes

 

Extend certain expiring provisions through 2012

Expand the Federal Unemployment Tax Act (FUTA) base and make the UI surtax permanent

Expand surface transportation funding

Other revenue proposals 


                                        
* The president would increase individual income taxes only for individuals with adjusted gross income over $200,000 and couples with AGI over $250,000 (2009 values, adjusted for inflation).

Descriptions of tax provisions and revenue estimates come from Department of the Treasury, General Explanations of the Administration’s Fiscal Year 2012 Revenue Proposals, February 2011. The Joint Committee on Taxation has also published cost estimates in Estimated Budget Effects of the Revenue Provisions Contained in the President's Fiscal Year 2012 Budget Proposal.

 
The Tax Policy Center has posted a variety of tables showing the distributional effects of the entire set of tax proposals, all individual tax proposals, and selected specific proposals. Click here for a linked guide to those tables. The administration assumes a baseline that permanently extends the 2001–03 tax cuts for all but the highest income taxpayers,** makes the estate tax permanent with 2009 parameters, and indexes the parameters for the alternative minimum tax (AMT) from their 2011 levels.

This analysis does not use the administration’s baseline. Most of our distribution tables compare the effects of tax proposals separately against both a current law baseline and a current policy baseline. The former assumes that the 2001–03 tax cuts expire in 2013 as scheduled (including changes in the estate tax) and that the AMT exemption reverts to its permanent value after 2011. Our current policy baseline assumes extension of all temporary provisions in place for calendar year 2011 except the payroll tax cut. In particular, it indexes the 2011 AMT exemption level for future years, makes the 2001 and 2003 individual income tax cuts permanent, extends certain provisions in the 2009 stimulus bill,*** makes 2011–12 estate tax law permanent with a $5 million exemption and 35 percent tax rate, and continues expiring tax provisions that Congress has regularly extended.

For each tax proposal, a separate web page describes current law, the proposed change, and its distributional effects. We do not consider the long-term effects on the economy.

Because some of the tax proposals are not indexed for inflation, their real effects would change over time. The value of most unindexed proposals would decline in real terms, either because their values are fixed in nominal dollar amounts or because nominal phaseout thresholds would affect more taxpayers. A more complete discussion of the impact of indexing appears at the end of this document.

TPC will update this analysis as the budget moves through Congress. Continue to introduction and summary 


**Individuals with adjusted gross income (AGI) over $200,000 and couples with AGI over $250,000, both 2009 values indexed for inflation.

***The current policy baseline assumes extension of three stimulus provisions: expansion of the earned income tax credit (EITC), increased refundability of the child tax credit, and the American Opportunity tax credit.