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Thursday, March 24, 2011

An Overview of Major Tax Proposals in the President’s FY2012 Budget

Mark P. Keightley, Coordinator
Analyst in Public Finance

James M. Bickley
Specialist in Public Finance

Gary Guenther
Analyst in Public Finance

Thomas L. Hungerford
Specialist in Public Finance

Steven Maguire
Specialist in Public Finance

Donald J. Marples
Section Research Manager

Molly F. Sherlock
Analyst in Economics

The Obama Administration released the President’s FY2012 budget proposal on February 14, 2011. According to the Administration’s estimates, the tax proposals in the budget would increase revenues $280 billion over the next 10 years. The Administration’s estimates were made relative to a current policy budget baseline, which assumes certain polices that are scheduled to change in the future by law, will not. In contrast, the Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT), make their projections relative to a current law budget baseline, which assumes future policy changes will occur as prescribed by current laws. This difference in baselines may result in the Administration’s estimates being different than future CBO and JCT estimates.

This report provides a broad overview of the provisions included in the President’s budget request. The budget groups proposed tax provisions into several general categories. The Administration estimates the net budgetary impact of the proposals in each category as follows: 
  • Tax cuts for families and individuals would reduce revenues by $92.0 billion over 5 years and $253.6 billion over 10 years. 
  • Tax cuts for business would reduce revenues by $46.6 billion over 5 years and $116.4 billion over 10 years.
  • Tax incentives to promote regional growth would reduce revenues by $4.7 billion over 5 years and $5.3 billion over 10 years. 
  • Extending certain expiring tax provisions through 2012 would reduce revenues by $21.7 billion over 5 years and 22.3 billion over 10 years.
  • Reducing certain tax expenditures to pay for three years of AMT relief would increase revenues by $113.9 billion over 5 years and $321.3 billion over 10 years.
  • Other revenue changes and provisions the proposal terms loophole closers would increase revenues by $166.2 billion over 5 years and $356.5 billion over 10 years. 
Congress has begun its consideration of the President’s budget. The House and Senate Budget Committees are responsible for formulating and reporting an annual budget resolution. The budget committees typically develop the budget resolution as they receive information and testimony from various sources, such as the Administration, CBO, and congressional committees with jurisdiction over spending and revenues. The timetable established in the Congressional Budget Act directs the Senate Budget Committee to report a budget resolution by April 1, and for the House and Senate to reach final agreement on a budget resolution by April 15.

Date of Report: March 17, 2011
Number of Pages: 31
Order Number: R41699
Price: $29.95

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