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February 10, 2010
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
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 d