| Abstract | President Obama's 2013 federal budget proposal included provisions that would generally increase taxes for the wealthy. This paper evaluates the Obama tax proposal on individual income taxes against a baseline representing the 2011 tax law. The evaluation first follows the guideline of four standards of a good tax by the AICPA (2001), and then focuses on the vertical equity of the proposal by computing its Kakwani indices of income inequality and tax progressivity. Finally, the paper uses Iyer et al.'s method to decompose the Kakwani indices by income components, and converts K(P) to isolate the effect of the tax system (Iyer, 2012, May-June). Results show that President Obama's tax plan in the 2013 federal budget proposal is more vertically equitable than the chosen baseline, in that it creates more equity in the income distribution (a higher K(I)), and that it has a more progressive tax system (a higher K(P)). Comparison of the indices with historical index values shows that the proposal's tax system is less progressive than any year from the period 1995-2006. |
