Tax Provisions in Obama's Budget

TaxProf Blog has posted the revenue estimates from Obama's budget proposals. These documents ought to come with an "estimated margin of error," because they are always wildly off base.

The media reports I saw, such as this NYTimes piece, suggested that restoring the itemized deduction phase-out would alone raise $318 billion. This seemed wildly optimistic to me, especially as the article said deductions would be capped to yield a 28% tax benefit, not a complete reduction.

In fact, the budget document projects $179 billion in revenue from reinstating the personal exemption phaseout and the limitation on itemized deductions. It also predicts that restoring the 36% and 39.6% tax rates (why not round up to 40%? too simple?) would raise $338 billion.

But the most interest part to me is the projection of capital gains tax collections. The first two items have no revenue effect until 2011, which is when all the new "upper-income tax provisions" take effect. The increase to a 20% capital gains tax rate somehow loses $182 million in 2009, then gains $1.1 billion in 2010. In 2011 the taxes start to pour in, with $28 billion attributed to that additonal 5% increment, and an additional $49 billion in 2012.

I guess that means the Dow is going back to 15,000?

Really, I'd love to read their methodology sometime, but I think it's classified information.

Overall, the increased taxes on "the rich" are projected to raise $636 billion, double the number I've seen in media reports.

What's more, there are several Carter-esque tax hits proposed for the oil and gas industries. Because we all remember how great the windfall profits tax was at generating new energy sources within the U.S. Oh, wait . . .