PWBM analyzed an increase in the corporate income tax rate to 28 percent, from its current level of 21 percent, as part of the Biden presidential campaign platform. Here, we analyze the budgetary and macroeconomic effects of corporate income tax increases to 25 percent, 28 percent, and 30 percent. This estimate will be updated as additional data becomes available on the state of the COVID-19 pandemic and the economy.
Recovery Rebates in the American Rescue Plan Act of 2021 (House of Representatives Version)
The House of Representatives passed the American Rescue Plan Act of 2021, a COVID-19 relief bill that includes direct payments (“recovery rebates”) to families. The rebate value is set to $1,400 per person (including dependents), phasing out over an income range of $75,000 to $100,000 for single filers ($112,500 to $150,000 for head of household filers and $150,000 to $200,000 for married filers). PWBM projects that this provision would cost $428 billion, with 93 percent of families receiving a payment.
Recovery Rebates in the American Rescue Plan Act of 2021 (Senate Version)
The Senate is currently negotiating its own version of the House-passed American Rescue Plan Act of 2021, a COVID-19 relief bill that includes direct payments (“recovery rebates”) to families. Reports indicate that the Senate version of the rebates will phase out more quickly than the House-passed version. The rebate value is set to $1,400 per person (including dependents), phasing out over an income range of $75,000 to $80,000 for single filers ($112,500 to $120,000 for head of household filers and $150,000 to $160,000 for married filers). PWBM projects that this provision would cost $416 billion, with 90 percent of families receiving a payment.
Epidemiological and Economic Effects of the COVID-19 Vaccine in 2021
Please see our previously published analysis.
Senator Romney’s Proposed Family Security Act
In early February 2021, Senator Mitt Romney (R-UT) proposed the Family Security Act to consolidate several forms of federal child assistance into a single, expanded child benefit to be administered through the Social Security Administration (SSA).
The act would provide a fully-refundable child allowance of $4,200 annually ($350 per month) per child ages 0-5, and $3,000 annually ($250 per month) per child ages 6 through 17. The credit would phase out at a rate of $50 for every additional $1,000 of income above the phase out threshold ($200K single / $400K joint).
The act would also simplify the existing structure of the Earned Income Tax Credit (EITC), so that the value of the credit is determined by filing status (married or single), and whether or not there are any eligible dependents (the number of dependents would no longer affect the value of the credit).
Other proposed changes to the tax code include elimination of head of household status, elimination of the child and dependent care credit (CDCTC), and elimination of the State and Local Tax (SALT) deduction.
PWBM projects that this proposal would cost $283 billion over the budget window, not including proposed changes to SNAP eligibility and elimination of TANF.
Ways and Means Committee Child Tax Credit Expansion Proposal
In early February 2021, Congressman Richard E. Neal (D-MA), Chairman of the House Ways and Means Committee, released legislative proposals for COVID-19 economic relief to be considered under the budget reconciliation process. One major element of the proposal is an expansion of the Child Tax Credit (CTC), similar to the plan envisioned in President Biden’s stimulus proposal. The CTC proposal would make the Child Tax Credit fully refundable, and would provide annual benefits of up to $3,600 per child under age 6, and up to $3,000 for children 17 and under. The credit would begin phasing out in value at a rate 5 cents for each additional dollar of income above $75,000 for single filers, $150,000 for married filers, and $112,500 for head of household filers. For tax units with incomes above these phase-out thresholds, the value of the credit would remain unchanged from current law.
PWBM projects that this provision would cost $100 billion. Families in the bottom 80 percent of the income distribution would see an average benefit of over $3,100.
Biden Administration COVID Relief Payments
Among other provisions, the Biden administration’s proposed stimulus plan includes another round of Economic Income Payments (EIPs). The EIPs would provide direct payments of $1,400 per person (dependents would also receive the full value), phasing out at a rate of 5 cents per dollar above $75,000 in income ($150,000 for married filers). PWBM projects that this provision would cost $477 billion, with 95 percent of families receiving a stimulus check.
Congressional Democrats' COVID Relief Payments
Congressional Democrats released an alternative to the Biden administration’s proposed stimulus plan that would narrow eligibility of the stimulus checks. The plan would offer direct payments of $1,400 per person (dependents would also receive the full value), phasing out at a rate of 5 cents per dollar above $50,000 in income ($100,000 for married filers). PWBM projects that this provision would cost $439 billion, with 91 percent of families receiving a check.
GOP COVID Relief Payments
Several GOP senators have proposed an alternative to the Biden administration’s proposed COVID relief bill. Among other provisions, the plan would offer direct payments of $1,000 per adult (with an additional $500 for dependents), phasing out at a rate of 10 cents per dollar above $40,000 in income ($80,000 for married filers). PWBM projects that this provision would cost $225 billion.
Capital Gains Withholding
We estimate the budgetary effects of withholding unrealized capital gains from wealthy taxpayers. The proposal would treat death and charitable contributions as taxable realization events, and require taxpayers with net worth above a certain threshold to pre-pay taxes on their unrealized capital gains over ten years. We estimate the revenue effects under two tax rate regimes and several net worth thresholds. For more details on this proposal, refer to the working paper “Capital Gains Withholding” by Emmanuel Saez, Danny Yagan, and Gabriel Zucman.
President Trump’s Proposed Corporate Tax Rate Drop
We present budgetary and economic estimates for President Trump's proposed corporate income tax rate reduction from 21 percent to 20 percent.
Dynamic Distributional Analysis of the Biden Platform
PWBM uses dynamic distributional analysis to evaluate the effects of the Biden platform on different age and income groups. We find that working-age individuals in the bottom 40 percent of taxable income benefit the most due to expanded health insurance, increases in housing subsidies, and lower cost of prescriptions in the Biden platform, while young, high-income individuals and wealthy retirees see net losses due to tax increases and lower returns on their savings. Please refer to our analysis of the estimate for more information.
President Trump’s Proposed Capital Gains and Dividend Tax Cut
PWBM estimates that reducing the top preferential rates on capital gains and dividends from 20 percent to 15 percent will cost $98.6 billion dollars over the ten year budget window. This tax cut will only benefit tax units in the top 5 percent of the income distribution, with 75 percent of the benefit accruing to those in the top 0.1 percent of the income distribution. Please refer to our analysis of the estimate for more information.
Forgiveness of Deferred Payroll Taxes
We estimate the budgetary and distributional effects of permanently forgiving the September to December 2020 payroll tax deferral under President Trump's August executive order. We project that this forgiveness would cost $122 billion dollars.
Macroeconomic effects of Biden’s immigration policy
Using PWBM’s dynamic model, we show the macroeconomic effects of Presidential candidate Biden’s immigration proposal. By 2050, GDP increases by 1.7 percent in 2050 relative to current law while GDP per capita stays the same. Please refer to our analysis of the estimate for more information.
Presidential Candidate Joe Biden’s Proposed Child Tax Credit Expansion
Presidential candidate Joe Biden recently announced a proposal to temporarily expand the Child Tax Credit (CTC). We find that this proposal would cost $110 billion if implemented solely for calendar year 2021 and would cost $1.4 trillion over ten years if extended permanently. While higher income households are more likely to have qualifying children and would see larger average tax cuts ($1160 for the 90-95th percentile), lower income groups would see the largest relative benefit, with after-tax incomes increasing by 9 percent for the bottom quintile. Refer to our analysis of the estimate for more information.
The Biden Platform
Presidential candidate Joe Biden’s campaign has released a substantial list of policy proposals. PWBM finds that over the 10-year budget window 2021 – 2030, the Biden platform would raise $3.375 trillion in additional tax revenue and increase spending by $5.37 trillion. Including macroeconomic and health effects, by 2050 the Biden platform would decrease the federal debt by 6.1 percent and increase GDP by 0.8 percent relative to current law. Almost 80 percent of the increase in taxes under the Biden tax plan would fall on the top 1 percent of the income distribution. Please see our analysis of the estimate for more information on the proposals.
Business Taxation in the Biden Tax Plan
We analyze several foreign and domestic business taxation provisions from the Biden tax plan. While raising the effective tax rate on foreign profits increases domestic capital, wages, and GDP, provisions that raise domestic business taxes have the opposite effect—when combined, these business tax provisions decrease the capital stock by 0.21 percent and decrease wages by 0.69 percent in 2050.
Short-Term Economic Effects of the Trump $1 Trillion Infrastructure Plan
We estimate that the anticipated Trump administration bill to invest $1 trillion in infrastructure would increase GDP up to $720 billion through June 2022. For more information, please see our full analysis.
The Impact of the Coronavirus Pandemic on Social Security’s Finances
PWBM projects that the ongoing coronavirus pandemic reduces the OASDI trust fund depletion date by four years, from 2036 to 2032, under the “U-shaped” recession projected by PWBM. If the recovery is faster (“V-shaped”), the trust depletion date falls by two years, from 2036 to 2034. The conventionally-measured OASDI 75-year actuarial balance worsens between 0.07 and 0.13 percent of future payroll.