The Better Base Case

12 Pages Posted: 30 Apr 2012 Last revised: 12 Nov 2013

See all articles by Edward D. Kleinbard

Edward D. Kleinbard

USC Gould School of Law

Joseph W. Rosenberg

Urban-Brookings Tax Policy Center

Date Written: June 11, 2012


The most recent Congressional Budget Office forecast for the federal budget estimates that the federal deficit will decline to about 1 percent of GDP a decade from now. But this essentially rosy forecast is predicated on the expiration of all current temporary tax policies – in particular, the 2001/03 personal income tax cuts – and a reversion to pre-2001 tax law. We argue that revenue collections of the same magnitude as those projected by the CBO are necessary over the medium term. But certain aspects of current tax law are problematic, and the efficiency and equity of current law’s scheduled post-2012 tax system can readily be improved.

We therefore develop an alternative post-2012 personal income tax regime, the “Better Base Case.” This proposal contemplates modifying current law by limiting personal itemized deductions to a 15 percent tax rate benefit, and then “spending” the resulting incremental revenues to (1) permanently patch the AMT, (2) tax dividends at the same preferential rates as net capital gains, (3) restore the estate tax to 2009 rates and exclusion and (4) restore the child credit to its current levels. Using the Tax Policy Center’s microsimulation model, we demonstrate that this package of reforms is revenue neutral compared with current law, and is slightly more progressive in its distribution of tax burdens. We further consider the political economy implications of the proposal, and conclude that the Better Base Case is a logical and feasible next step in the evolving debate over the size and financing of the federal government.

Suggested Citation

Kleinbard, Edward D. and Rosenberg, Joseph W., The Better Base Case (June 11, 2012). Tax Notes, Vol. June 4, 2012; USC CLEO Research Paper No. C12-5; USC Law Legal Studies Paper No. 12-9. Available at SSRN:

Edward D. Kleinbard (Contact Author)

USC Gould School of Law ( email )

699 Exposition Boulevard
Los Angeles, CA 90089
United States

Joseph W. Rosenberg

Urban-Brookings Tax Policy Center ( email )

Urban Institute
2100 M Street NW
Washington, DC 20009
United States


Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics