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1 Gerald Prante & Patrick Fleenor, Distributional Analysis of President Obama's Fiscal Year 2011 Budget Policies 1 (2010)

handle is hein.taxfoundation/ffcajxz0001 and id is 1 raw text is: FOUNDATION February 10, 2010 No. 209 FISCAL FACT Distributional Analysis of President Obama's Fiscal Year 2011 Budget Policies by Gerald Prante and Patrick Fleenor This Tax Foundation Fiscal Fact takes a preliminary look at the distributive effects of President Obama's budget, released last week. Using the Tax Foundation's Fiscal Incidence Microsimulation Model, we are able to estimate the level of income redistribution in both existing and proposed federal fiscal policies and thereby estimate the change in income redistribution that would come about as a result of a given policy change. Even though Pres. Obama's budget is titled Fiscal Year 2011 Budget, it includes estimates for his policy proposals over the next ten years (2011-2020). Therefore, this Fiscal Fact looks at fiscal year 2012 so as to avoid complications that come about as a result of the fiscal-calendar year split of the Bush tax cuts set to expire on Dec. 31, 2010. For simplicity, the baseline used in this Fiscal Fact is the same baseline used in Pres. Obama's budget. Also, due to uncertainty regarding the specifics involved, we exclude from this analysis three allowance categories in the president's budget: jobs initiative allowance, health care reform allowance, and climate change allowance. Our measure of income redistribution is relatively simple as we ask two hypothetical questions: (1) How much in federal taxes does a given income group pay under a given set of tax policies? (2) How much in federal taxes would that income group pay under a benefit principle system of taxation whereby a given family's tax share was equal to its share of the benefits from government spending? The difference between the answers to these two questions is our measure of income redistribution. Before we present the results, we should answer two commonly asked questions pertaining to the methodology. First, we assume that national defense benefits each family in proportion to its share of cash income received. Second, we assume that the deficit is borne by today's families and is financed by a combination of proportional tax increases and proportional

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