The New York Times has a long-standing antipathy toward the art market. And the general public’s interest in income inequality only continues to grow. But this story about the latest Federal budget proposal eliminating 1031 exchanges for art works seems oddly off topic.

Now, it is important that dealers and art investors understand that the administration is thinking of shutting artworks out from 1031 eligibility. But numbers in the article suggest the change is not targeted at the art market, even if it may impact art dealing.

In its 2016 budget, the Obama administration is proposing to eliminate the tax break for exchanges of art and other collectibles, and to limit it in other cases, like the swapping of real estate parcels. It estimates that the change could bring in $19.5 billion in deferred or avoided taxes over the next 10 years. While federal officials say they do not have a precise breakdown of the tax impact of 1031 exchanges specifically for art, the White House’s attention suggests that a sizable amount of tax revenue is at stake.

If all of the tax savings came from art, it would suggest a nominal value of all US 1o31 exchanges on art to be $7bn annually. It seems hard to imagine, even in this raging art market that there is remotely $7bn worth of art swapped each year.

So the bulk of the tax savings must come from eliminating real estate swaps of some kind. The Times admits that many of the 1031 exchanges, which only defer taxes, are for lower-value works. And there are other indications that the 1031 changes would only include art as collateral damage:

A study by Ernst & Young for the exchange federation estimated that eliminating 1031 exchanges could, under some conditions, shrink gross domestic product by about $8 billion annually.

That’s roughly the volume of transactions needed to get you the nearly $20bn in tax revenue over 10 years.

Update: Katya Kazakina gets an oar in with these facts:

 The IRS doesn’t track the exchanges by type, spokesman Anthony Burke said. In 2012, the last year for which information is available, 145 million people filed federal income tax returns; just 194,563 people, or 0.1 percent, filed Form 8824 for all types of like-kind exchanges.

Art exchanges represent a tiny fraction of all exchanges. As a qualified intermediary, Miami-based lawyer Stephen Wayner said he does about 2,000 like-kind exchanges a year; about 20 of those are art-related.

Tax Break Used by Investors in Flipping Art Faces Scrutiny  (NYTimes.com)

Want to Avoid U.S. Taxes on $80 Million Warhol? Buy More Art  (Bloomberg Business)