A new analysis by the Tax Foundation, a nonpartisan fiscal watchdog, estimates that President Biden‘s $1.75 trillion expansion of the federal safety net could kill more than 103,000 jobs over the next decade and add $750 billion to the federal deficit.
The estimate is based on a thorough analysis of the White House‘s spending “framework” and the corresponding 1,684-page bill text released by House Speaker Nancy Pelosi. Experts from the Tax Foundation say the proposal will fall far short of the promises made by the White House.
“We estimate that the House bill would reduce long-run economic output by nearly 0.4% and eliminate about 103,000 full-time equivalent jobs in the United States,” the experts wrote. “It would also reduce average after-tax incomes for the top 80 percent of taxpayers over the long run.”
The analysis differs strongly from the rosy picture President Biden painted last week in unveiling the deal.
“It’s a framework that will create millions of jobs, grow the economy, invest in our nation and our people, turn the climate crisis into an opportunity, and put us on a path not only to compete, but to win the economic competition for the 21st century against China and every other major country in the world,” Mr. Biden said from the White House.
Administration officials have claimed all of the new spending programs proposed by the framework are fully funded. The White House estimates that the tax hikes included in the package will generate more than $1.995 trillion in revenue over the next 10 years.
Much of that sum supposedly comes from a series of new taxes on corporations and the wealthy.
Mr. Biden is proposing a 15% minimum tax on corporate taxes, along with a corresponding 15% surcharge on foreign earnings. A further 1% surcharge is to be levied on corporate stock buybacks.
The White House estimates the new taxes will raise $800 billion in new revenue.
Economists from the Tax Foundation disagree, however. They say not only are the revenue estimates off, but the bill actually adds more than $750 billion to the federal deficit over the next decade.
“Accounting for the reduced size of the economy resulting from the tax increases, we estimate the House bill would raise in total about $615 billion in revenue … over the next decade,” they wrote. “We estimate that the bill would result in $752 billion of accumulated deficits … leading to an increase in payments to foreign owners of the national debt.”
The foundation also notes that Mr. Biden‘s tax hikes will cripple the U.S. economy as it attempts to rebound from the coronavirus. Its analysis shows that Mr. Biden‘s 15% minimum tax on corporate profits would cost the country more than 25,000 jobs alone.
Apart from corporate tax hikes, the White House is also proposing a menu of taxes on individuals.
Mr. Biden is backing a 5% “wealth tax” on those with an adjusted gross income above $10 million. The figure jumps to 8% on adjusted gross incomes over $25 million.
“I can’t think of a single time when the middle class has done well but the wealthy haven’t done very well,” Mr. Biden said. “I can think of many times, including now, when the wealthy and the super-wealthy do very well and the middle class doesn’t do well.”
Despite the rhetoric, Tax Foundation economists say the new provisions will impact all workers by killing more than 29,000 jobs.
The White House did not immediately respond to requests for comment on this story. At the moment, congressional Democrats are making minor changes to the package, but its overall framework is likely to remain the same.
The new report comes one day after Sen. Joe Manchin III, a West Virginia Democrat, accused his party of engaging in “budget gimmicks” to hide the true cost of the spending package.
“As more of the real details outlined … what I see are shell games and budget gimmicks that make the real cost of this so-called ‘$1.75 trillion’ bill estimated to be twice as high,” he said. “That is a recipe for economic crisis. None of us should ever misrepresent to the American people what the real cost of legislation is.”
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