Senator Elizabeth Warren has proposed a wealth tax equal to 2 percent of net worth above $50 million and 6 percent of net worth above $1 billion, which her campaign estimates would raise $3.75 trillion over 10 years.
PWBM estimates that the proposal would raise about $2.7 trillion over fiscal years 2021-2030, not including macroeconomic effects. Including macroeconomic effects, PWBM estimates that the proposal would raise about $2.3 trillion over the same period.
PWBM projects that the proposal would reduce GDP by 0.9 percent in 2050 under the standard budget scoring convention that additional revenues reduce the deficit. If the revenues were instead spent on public investments, PWBM projects GDP in 2050 would fall between 1.0 and 2.1 percent, depending on the productivity of the investment. Average hourly wages in the economy in 2050, including wages earned by households not directly subject to the wealth tax, would fall between 0.8 and 2.3 percent due to the reduction in private capital formation.
We estimate the budgetary and economic effects of increasing the top rate on long-term capital gains and qualified dividends from 20 percent to 24.2 percent, which is enacted on January 1st, 2021. We project that it will raise around $60 billion of additional revenue on a conventional basis over the 10-year budget window and increase GDP by 0.1 percent by 2050.
We estimate the budgetary and economic effects of a new broad-based 1 percent value-added tax (VAT) with a progressive universal rebate calculated based on earnings, which is enacted on January 1st, 2021. We project that it will raise $700 billion of additional revenue on a conventional basis over the 10-year budget window and increase GDP by 0.8 percent by 2050.
We estimate the budgetary and economic effects of a new carbon tax of $30 per ton of emissions, which is enacted on January 1st, 2021, rising by inflation plus 5 percent through 2050. We project that it raises $1.6 trillion of additional revenue on a conventional basis over the 10-year budget window and increases GDP by 2.2 percent by 2050.
We project that President Biden’s FY2023 Budget, taken as a whole, would reduce debt and grow the economy by 0.4 percent over time, with two major components of the Budget---"Build Back Better” and “New Provisions”---working in opposite directions.
We estimate that suspending the federal gas tax from March to December 2022 would lower average gasoline spending per capita between $16 and $47, depending on geographic location and assumptions, but lower federal tax revenue by about $20 billion over that period.
This brief examines different approaches to removing the capital gains “lock-in effect” within a realization-based tax framework. We estimate that this change would produce between $115 billion and $357 billion in additional tax revenue over the next 10 years, depending on the exact design.
PWBM projects that the spending and taxes in the Build Back Better Act (H.R. 5376), as written, would add up to 0.2 percentage points to inflation over the next two years and reduce inflation by similar amounts later in the decade. As an illustrative alternative, if temporary major spending provisions were made permanent, the bill would add up to a third of a percentage point to near-term inflation and have a negligible impact on inflation later in the decade.
PWBM estimates that H.R. 5376, the Build Back Better Act, would increase spending by $2.1 trillion over the 10-year budget window while increasing revenue by $1.8 trillion, for a 10-year deficit of $274 billion. By 2050, the proposal would decrease GDP by 0.2 percent, relative to current law.
PWBM projects that Sen. Wyden’s billionaire income tax proposal would raise $507 billion over the budget window, more than half of which would come from a one-time transition tax on previously accrued, unrealized capital gains on publicly traded assets.
PWBM estimates that the White House’s Build Back Better reconciliation framework would increase spending by $1.87 trillion over the 10-year budget window and revenues by $1.56 trillion over the same period. By 2050, the proposal would increase federal debt by 2.0 percent and decrease GDP by 0.1 percent, relative to the current law baseline.
PWBM projects the House Ways and Means Committee proposal to temporarily extend the 2021 Child Tax Credit design would provide an average 2022 refundable tax cut of $2,785 to 78 percent of households with children at a budgetary cost of $545 billion over the 10-year budget window. Changes to phase-out and phase-in thresholds would reduce the budgetary cost but also reduce the size of the tax cuts.
Higher inflation reduces the real value of the government’s outstanding debt while increasing the tax burden on capital investment due to lack of inflation indexing. Increasing the current annual inflation target regime from 2 percent to 3 percent inflation reduces debt while lowering GDP.
PWBM estimates that tax policy changes in low-tax countries in response to the recent OECD global minimum tax deal could cost the U.S. as much as 50 percent of its minimum tax revenue.
PWBM projects that the long-run aggregate macroeconomic effects of Senator Joe Manchin's $1.5T reconciliation framework would be negligible. The economic benefits would largely accrue to younger, poorer households while the economic costs would fall mostly on richer households.
We project that recent tax reforms proposed by the House Ways and Means Committee would increase the incentive of U.S. firms to shift intangible investments and profits to foreign countries with a tax rate below 20.7 percent.
The House Ways and Means Committee reforms proposed as part of budget reconciliation would increase the U.S. statutory corporate income tax rate to 26.5 percent, bringing the combined federal and state rate to 30.9 percent, making the U.S. rate the third highest among OECD members.
The House Ways and Means Committee reforms proposed as part of budget reconciliation would more than triple the U.S. tax rate on multinationals’ foreign income and produce a higher rate than a proposed global agreement currently being negotiated through the OECD.
PWBM projects that the revenue-raising provisions in the House Ways and Means Reconciliation Bill would raise roughly $2.4 trillion from 2022 to 2031.
Drafting a budget from the August 2021 Senate reconciliation framework that satisfies the Senate rules of reconciliation (“Byrd Rule”) will require a decrease in new outlays or a large increase in revenues (or both) after the standard 10-year budget window.
One such potential reduction in spending would allow the new non-healthcare related discretionary spending provisions to expire after 2031.
With this reduced spending in 2031, we project that the reconciliation package will decrease GDP by 4.0 percent in 2050. Without this spending decrease (and where the Byrd Rule is not satisfied), we project a 4.8 percent fall in GDP in 2050.
We analyze a combination of net revenue raisers consistent with the requirements released by the Senate Budget Committee on August 9th, 2021, for budget reconciliation.
We estimate that the recent OECD proposal for a global minimum tax would triple the effective U.S. tax rate on foreign income from 2 percentage points to 5.8 percentage points. The Biden administration’s proposed changes to the U.S. global minimum tax regime would instead raise the effective U.S. tax rate on foreign income to 12.4 percentage points.
Under current law, PWBM projects that U.S. multinationals will report a cumulative $3.6 trillion in Global Intangible Low-Taxed Income (GILTI) between 2022 and 2031. Data released in July 2021 by the Internal Revenue Service for the 2018 tax year provides the first opportunity for a more extensive validation of PWBM’s model of U.S. multinationals’ tax returns. PWBM projects 2018 GILTI within 5.3 percent of the IRS value, suggesting a very good model fit.
PWBM estimates that President Biden’s FY2022 budget proposal would increase spending by $6.1 trillion and increase revenue by $3.9 trillion over the 2022-2031 budget window. By 2050, we project that the President’s budget proposals would decrease public debt by 5.1 percent and decrease GDP by 1.5 percent relative to current law.
