Tax Proposals in the 2011 Budget

The Tax Policy Center offers the table below as a guide to the tax provisions of President Obama's 2011 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. Further details on the analysis appear on the next page.

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Temporary Recovery Measures   Making Work Pay Credit -61 Temporary increased expensing for small businesses * Cash assistance to states in lieu of housing tax credits -0.2 Temporary bonus depreciation for certain property -2 Jobs initiatives -50 Other temporary provisions not evaluated1 -13   Individual Tax Provisions Provisions Affecting Lower- and Middle-Income Households   Provisions Affecting High-Income Households Expand Earned Income Tax Credit -15** Reinstate 36 and 39.6 percent rates for high-income taxpayers2 364 Expand refundability of Child Tax Credit ** Reinstate personal exemption phaseout and limitation on itemized deductions for high-income taxpayers2 208 Expand Child and Dependent Care Tax Credit -13 Impose 20 percent rate on capital gains and dividends for high-income taxpayers2 107 Provide American Opportunity Tax Credit -75 Limit value of itemized deductions to 28 percent 291 Expand saver's credit and require automatic enrollment in IRAs -40 Eliminate Advanced Earned Income Tax Credit 1   Business Tax Provisions Eliminate capital gains taxes on small businesses -8   Tax carried interest as ordinary income 24 Make research & experimentation credit permanent -86 Reform U.S. international tax system 117 Reform treatment of financial institutions 93 Combat Under-Reporting in Offshore Jurisdictions 5 Codify economic substance doctrine 4 Reinstate Superfund Taxes 19 Increase certainty regarding worker classification 7 Repeal LIFO 59 Eliminate fossil fuel tax preferences 39 Reform treatment of life insurance companies 14   Business provisions not evaluated3 84   Individual and Business Continue remaining expiring provisions through CY 2011 -56   Reduce the tax gap and make reforms 14 Extend and modify new markets tax credit   -3  Modify estate and gift tax rules 24      Total, all tax provisions 1,065 Tax revenue adjustments to baseline4   Index 2009 parameters of the AMT to inflation -672 Continue the 2001 and 2003 tax cuts -2,739 Make 2009 estate tax permanent -264 Expand earned income and child tax credits -98**

*    Less than $500 million.
**   The administration includes expanded refundability of the child credit and part of the expansion of the earned income credit in its baseline. The $98 billion revenue cost of those provisions over the 2010-2020 period is included under "Tax revenue adjustments to baseline." Of that cost, $15 billion results from providing more EITC to married couples and $83 billion comes from expanding the child credit.
1. Provide $250 refundable credit for some government retirees ($0.3 billion); extend COBRA health insurance premium assistance ($9 billion); and provide tax credits for investment in some advanced energy projects ($4 billion).
2. Couples with income over $250,000 and single people with income over $200,000.
3. Modify cellulosic biofuel producer credit ($25 billion), make unemployment insurance surtax permanent ($14 billion), other tax increases ($12 billion), and other tax cuts (-$5 billion).
4. The Administration baseline continues the 2001 and 2003 tax cuts (with the estate tax fixed at 2009 law), indexes the 2009 AMT parameters for inflation, and expands the earned income and child tax credits.

Descriptions of tax provisions and revenue estimates come from Department of the Treasury, General Explanations of the Administration's Fiscal Year 2011 Revenue Proposals, February 2010.

Revenue effects shown in the table cover 11 years—2010-2020—even though the budget would begin in 2011, when most of the tax changes would take effect. Some proposed tax changes would affect revenue in 2010 because of behavioral changes.

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 2001-2003 tax cuts, makes the estate tax permanent with 2009 parameters, indexes the exemption for the alternative minimum tax (AMT) from its 2009 level, increases the earned income credit for married couples, and expands refundability of the child credit for low-income working families.

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 2001-2003 tax cuts expire in 2011 as scheduled (including changes in the estate tax) and that the AMT exemption reverts to its permanent value after 2010. Our current policy baseline assumes permanent continuation of the 2001-2003 tax cuts for all taxpayers, the estate tax at its 2009 level ($3.5 million effective exemption and a 45 percent tax rate), and an indexed patch to the AMT that maintains its exemptions at the real levels in effect in 2009.

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. Click here to read a more complete discussion of the impact of indexing.

TPC will update this analysis as the budget moves through Congress.