Biden’s plans would increase revenue by $3T, spending by $5T: analysis
Democratic presidential nominee Joe Biden’s plans would increase tax revenue by $3.375 trillion and raise federal spending by $5.35 trillion over a 10-year period, according to an analysis released Monday by the Penn Wharton Budget Model (PWBM).
After accounting for macroeconomic effects, Biden’s plans would slightly increase the federal debt and decrease gross domestic product in 2030, but the debt would decrease and GDP would increase compared to current law by 2050, the analysis found.
“At the end of the day, they actually decrease debt because they do have significant revenue raisers,” Richard Prisinzano, director of policy analysis for PWBM, said in an interview with The Hill. “And the economy is more productive. As we put in things like education and infrastructure, workers become more productive, and that gives a boost to the economy.”
Biden’s tax plan includes a number of proposals aimed at increasing taxes on high-income people and corporations.
These include raising the top individual income tax rate from 37 percent to 39.6 percent, subjecting earnings above $400,000 to Social Security payroll taxes, taxing capital gains at the same rate as ordinary income for people with income of more than $1 million, raising the corporate tax rate from 21 percent to 28 percent, increasing the tax rate on foreign profits, and creating a 15-percent minimum tax for corporations with income on their financial statement of more than $100 million.
PWBM’s analysis did not include tax proposals that the Biden campaign released last week aimed at preventing companies from moving jobs overseas.
PWBM looked at spending proposals from Biden in areas including education, infrastructure and research and development, housing, Social Security and health care. The analysis included Biden’s proposals to expand tax credits in its spending estimates, rather than its tax revenue estimates.
PWBM estimated that Biden’s corporate tax proposals would raise about $1.4 trillion, his payroll tax proposals would raise about $993 billion and his individual income tax proposals would raise $944 billion from 2021 through 2030.
Biden has said that he won’t raise taxes on anyone making under $400,000. PWBM said in its report that “under the Biden tax plan, households with adjusted gross income (AGI) of $400,000 per year or less would not see their taxes increase directly but would see lower investment returns and wages as a result of corporate tax increases.”
Those with AGI at or below $400,000 would on average see their after-tax incomes decrease by 0.9 percent, while those with income above $400,000 would see their after-tax incomes decrease by 17.7 percent, PWBM said.
Biden’s campaign has said that the aftermath of President Trump’s tax-cut law raises questions about the notion that part of the corporate tax is paid by workers. Prisinzano said that if the corporate tax increase is not included, PWBM’s estimates show no tax increases for people with incomes under $400,000.
PWBM estimated that Biden’s education plans — which include universal pre-K, expanding funding for Title I schools, two years of debt-free community college and tuition free public college for students from families making below $125,000 — would increase federal spending by $1.9 trillion from 2021 through 2030. The researchers estimated that the Democratic nominee’s plans for new investments in infrastructure and research and development would increase spending by $1.6 trillion in the 10-year period.
Biden’s plans to expand and support low-income housing would increase spending by $650 billion and his plans to increase Social Security benefits would increase spending by $291 billion over a decade, according to the paper.
PWBM estimates that Biden’s plans to lower prescription drug prices would reduce federal spending by about $1.3 trillion, while other health care proposals — including lowering the Medicare eligibility age from 65 to 60, expanding ObamaCare insurance marketplaces and making ObamaCare’s premium tax credit more generous — would increase federal spending by about $1.6 trillion over 10 years.
PWBM said that it did not include Biden’s proposal to create a public health insurance option in its analysis because the proposal was not detailed enough to model.
In 2030, Biden’s tax and spending proposals would decrease GDP by 0.4 percent and increase debt held by the public by 0.1 percent compared to the current law baseline. But in 2050, they would increase GDP by 0.8 percent and decrease debt held by the public by 6.1 percent compared to the baseline, PWBM said.