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1 Stephen J. Entin, Simulating the Economic Effects of Obama's Tax Plan 1 (2012)

handle is hein.taxfoundation/ffddjxz0001 and id is 1 raw text is: TAX(;. % November 1, 2012 No. 339 Simulating the Economic Effects of Obama's Tax Plan By Stephen J Entin As a follow-up to the Tax Foundation's recent assessment of the macroeconomic effects of Governor Mitt Romney's tax plan, we now turn our attention to measuring the macroeconomic effects of President Barack Obama's tax proposals. The first part of this paper discusses the economic and distributional effects of the president's proposals to sunset the Bush-era tax rates for high-income taxpayers. Next, we present the results of our modeling of the two largest tax increases in the Affordable Care Act (ACA), which will become effective in 2013. We then analyze the president's corporate tax proposals as outlined in the White House's Framework for Business Tax Reform. The Economic Impact of Obama's Individual Income and Estate Tax Plan We modeled the following elements of the president's individual income and estate tax proposals, as presented in his 2012 Budget documents, in the following manner: * Retain the Bush tax cuts for taxpayers in the bottom four tax brackets. This includes keeping the current marginal tax rate levels of 10 percent, 15 percent, 25 percent, and 28 percent, and keeping the capital gains and dividend rate caps of 0 percent for people in the 10 percent and 15 percent brackets, and 15 percent for people in the 25 percent and 28 percent brackets. * Increase the marginal tax rates in the top two tax brackets from 33 percent to 36 percent and from 35 percent to 39.6 percent.1 Increase the capital gains top rate to 20 percent and let the tax rate on dividends revert to 39.6 percent for people in the top two brackets.2 The top brackets for taxable income currently kick in at approximately the President's proposed thresholds of $250,000 in adjusted gross income for joint filers and $200,000 for single filers, at typical levels of itemized deductions. The equivalent dollar amounts for these brackets were lower in 2008 and were run at those levels. 2 This was approximated by letting both rates rise to 24 percent, which is the weighted average of the two rates given the relative amounts of each realized in the base year.

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