In terms of tax policy, the president's budget has a few intriguing new provisions.
Here is a sort of data dump (sorry) of various reactions I’ve had to the President’s FY2013 budget proposals in the past week.
I was most intrigued by what is new in the President’s proposals in terms of tax policy: there’s actually a bolder move to combine the “Buffett Rule”–raising taxes on the rich so that their effective (average) tax burdens aren’t any lower than those of middle-class households–with a more fundamental tax reform strategy (which economists like) of broadening the tax base. I’ve said before that there are lots of different ways to raise taxes on millionaires, but I’d prefer to see it done by reducing tax expenditures (which disproportionately benefit higher-income households and are also economically inefficient) rather than by (just) raising marginal tax rates on the currently rather narrow definition of taxable income.
Two tax proposals new to the President’s budget this year that score well in this regard are: (i) the expansion of the limit of itemized deductions policy to a broader set of tax preferences–including the exclusion of employer-provided health benefits (wow!); and (ii) letting the expiration of the Bush tax cuts for high-income households extend to the full expiration of preferential dividend tax rates, such that they would return to being taxed at full, ordinary income rates.
I wrote on Concord’s blog about the itemized deduction proposal here.
I write about this “Buffett Rule route to fundamental tax reform” among my other reactions to the tax policies in the President’s budget in my next Tax Notes column, which comes out next Monday. I’ll give a Cliff’s Notes version of that column here then.