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 analyze the budgetary and economic effects of three very different illustrative policy bundles that reduce federal budget deficits over time without shrinking the economy relative to current law with rising debt. The results also demonstrate how federal debt falls short of measuring the true fiscal burden being shifted to future generations.
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.
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.
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.
The USDA re-evaluation of the Thrifty Food Plan increases the average SNAP benefit by $36.24 per person per month starting in October 2021. PWBM projects that the increase in SNAP spending lowers GDP by 0.2 percent by 2031. People who receive SNAP as well as older working age individuals are helped by policy change while young people with high incomes as well as rich retirees are harmed due to lower future wages and a fall in the return to capital.
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.
PWBM projects that the legalization provisions of the U.S. Citizenship Act proposed by President Biden would increase per capita spending on the Supplemental Nutrition Assistance Program (SNAP) by 1.2 percent in 2030 and 0.8 percent 2050 relative to the current policy baseline. Per capita payroll taxes would decrease by 0.1 percent relative to the current policy baseline.
