What You Need to Know About the 2012 Budget

Ed. Note: What follows was adapted from a post for WSJ.com's Financial Adviser blog. The original post is here .

Let's not turn this into a Tea Party forum or a political circus. I'm just relaying the facts. We can whip out our contradictory charts showing how higher taxes either bolster or crush the economy later.

Obama introduced his 2012 budget this week. There is plenty to chew on in the reports even if you agree with me that the GOP will punch holes in it like they're working in a Jarlsberg swiss cheese plant.

Of particular concern to wealthy individuals are the following details ( via Bloomberg ):

• The plan would allow Bush-era tax cuts to expire at the end of 2012 for individuals making more than $200,000 and married couples making more than $250,000

• Wealthy taxpayers would have their itemized deductions limited starting in 2012, including deductions for mortgage interest, charitable contributions and state and local taxes

• Extend tax credits for college expenses and expand them for child care. A more generous Earned Income Tax Credit for families with three or more children would be made permanent.

The end result (at least on paper) is the following:

"In all, the budget proposal would impose about $730 billion in new taxes on businesses and wealthy individuals over the next decade, while cutting about $400 billion in taxes on middle-income families, the working poor and other businesses, for a net tax increase of about $330 billion.

"Those numbers, however, don't include additional tax revenue from letting Bush era tax cuts for the wealthy expire at the end of 2012. Letting those tax cuts expire would generate an additional $709 billion over the next decade, according to the budget proposal."

Again, this is just the opening salvo in what is sure to be a lusty battle in Washington. Republicans are committed to a $100 billion reduction in the budget and programs cuts that go much farther.

One other item investors may want to be conscious of is the SEC funding request being made by the President for 2012. According to a story in Investment News , Obama is seeking to raise the SEC's budget by $300 million to $1.4 billion.

He will face stiff opposition from the budget hawks and free marketeers now that Madoff and the credit crisis are beginning to recede from memory. The Republican budget actually has a funding cut to the SEC of $188 million for the fiscal 2011 allocation!

These are the proposals folks, don't pillory the messenger. Update your clients accordingly.