Blog Post

Charitable Donations Fall After 2017 Tax Reform Meeting PWBM Expectations

Forbes’ senior contributor Kelly Phillips Erb wrote about the sharp fall in charitable contributions claimed by taxpayers in 2018. Recent data from the Internal Revenue Service (IRS) reveals that in 2018, charitable deductions claimed by taxpayers fell by $37 billion compared to 2017. Erb cites PWBM research, which projected a 5.1 percent reduction in total charitable giving due to the TCJA.

Program Choice and Financing Matter for Infrastructure Plans

PWBM’s Jon Huntley and Richard Prisinzano discussed how the financing of a federal infrastructure plan influences its effect on economic growth. Even though infrastructure investments increase productivity, plans that are deficit-financed can reduce GDP relative to current policy.

Payroll Tax Holiday: Budgetary, Economic, and Distributional Effects

We estimate that a one-year “payroll tax holiday” would cost the federal government between $141 and $151 billion over the standard budget window and increase GDP by 0.3 percent in 2020, with effects eventually turning slightly negative over time with higher deficits.

Dynamic Distributional Analysis

PWBM introduces a new measure of distribution that corrects numerous deficiencies in existing distributional measures that are commonly used to evaluate policy analysis.

Diane Lim appointed PWBM Senior Advisor

Excited to announce the appointment of Dr. Diane Lim as senior advisor to the Penn Wharton Budget Model.

The Effect of the U.S. - China Trade War on the U.S. Economy

PWBM’s Efraim Berkovich, the Wharton School’s Marshall Meyer and Mary Lovely of the Maxwell School of Syracuse University discussed how the recently imposed tariffs on Chinese goods are raising prices for consumers, disrupting supply chains and weighing down economic growth in the long-run.

Are Tariffs a Drag? Trade War Pushes Interest Rates Up, Economy Down

We find that, excluding times of intervention by the Federal Reserve, interest rates on U.S. government debt are higher when levels of effective openness to foreign capital flows are lower, increasing the government’s borrowing costs.

The Trade War Trade-Off: Foreigner Ownership of American Business Actually Rises

We project that, although a trade war initially lowers the share of U.S. capital owned by foreigners, the trade war will actually increase the amount of American business capital owned by foreigners, by almost $1 trillion by 2028. Over time, the foreign owned share of business capital rises from about 29 percent today to over 34 percent in 2049.

The Trade War Trade-Off: Short Term Gains Then Long Term Losses

We project that even if the recently imposed tariffs are removed, GDP will be permanently smaller relative to having had no trade war. Extending the current trade war by several more years will lead to smaller losses in GDP in 2020 but will reduce GDP by more in the long run.

Revenue Raised by Tariffs on China Doesn’t Cover Costs

New York Times reporters Ana Swanson and Jim Tankersley compared the revenue generated by tariffs on China with the costs of the trade war to U.S. businesses and consumers. Tariffs on Chinese goods have raised $20.8 billion in revenue. However, President Trump has promised $28 billion to compensate farmers alone. PWBM explains that tariffs raise the price of goods. PWBM’s Richard Prisinzano noted, “The tariffs make all consumers worse off.”  In addition, Kent Smetters, PWBM’s Faculty Director, estimated that the tariffs could, “cost the median U.S. household with earnings of $61,000 about $500 to $550 a year.” 

Policymakers Cite PWBM Estimates About Indexing Capital Gains to Inflation

On July 12, 2019, Senator Sherrod Brown (D-OH) and Ron Wyden (D-OR) wrote a letter citing PWBM to the Steve Mnuchin, Secretary of the Treasury, to reject a plan to change tax law so that capital gains would be adjusted for inflation. The law change would cut taxes paid on the sale of assets such as stocks, real estate, and other investments. The

Differential Tax Rates Create Opportunities for Tax Avoidance

On June 7, Hill staffers, fiscal experts, and PWBM gathered to discuss the federal revenue loss created by tax avoidance. The U.S. has different tax rates for different income streams, thus there are opportunities for individuals and businesses to reduce their tax bills by recharacterizing income to pay a lower rate.

The Effects of Growing Federal Debt on the United States’ Economy

In today’s low interest rate environment, the cost of federal debt is lower than it used to be. However, long-run concerns loom. PWBM projections show that policies that reduce federal debt over time produce more economic growth than current policy.

The White House's Plan to Indexing Capital Gains to Inflation

Bloomberg’s Saleha Mohsin reports the Trump administration’s plan to index capital gains to inflation. Citing PWBM’s analysis, Mohsin highlights that indexing capital gains will disproportionately benefit those with high incomes. 

Projections for the Evolution of the Unauthorized Immigrant Population in the United States

PWBM projects the number of unauthorized immigrants to fall from a peak of 4 percent of the U.S. population in 2007 to under 2.5 percent in 2050. In recent years, fewer unauthorized immigrants have arrived from Mexico while more have arrived from Central America. PWBM projects that future growth of the population of unauthorized immigrants will be driven by visa overstays.

Projections for the Evolution of Naturalized Citizens in the United States

PWBM projects that by 2050 one in ten U.S. citizens will be foreign-born, up from 7 percent today. We account for different historical naturalization patterns of immigrants from different countries, including the time immigrants reside in the U.S. Thus, this increase reflects shifts in the origins of lawful immigrants. In particular, we project that the shift away from immigrants arriving from Mexico and toward immigrants arriving from Asia to continue.

The Effects of Changes to Immigration Policy on the United States’ Population

We project that increasing annual net legal immigration leads to a younger and more educated U.S. population. These population changes are likely to have a positive impact on entitlement finances and tax burdens relative to current policy. In contrast, decreasing annual net legal immigration likely has the opposite effects.

2020 Presidential Campaign Proposals for Immigration Policy: Indicators of the Economic Impact on Each State

Introducing PWBM’s Interactive 2020 Campaign Issue State Maps. We use data to inform people about the impact of campaign proposals on their states. Here we present six indicators focused on immigration policy for each state. Although PWBM has shown that increasing immigration boosts economic growth for the U.S. as a whole, these indicators imply that the impact of changes to immigration policy on a state will depend on the demographics of that state.

Policy Options to Increase Charitable Giving Using Tax Incentives

By substantially expanding the standard deduction, the Tax Cuts and Jobs Act reduced the incentive to make charitable contributions. We make use of data on non-tax itemizers to examine several potential policies designed to increase tax incentives for charitable giving. In particular, we project that a non-refundable credit for charitable contributions for filers who don’t itemize would expand giving by $208 billion (5.2 percent) and reduce tax revenue by $267 billion (0.6 percent) over the 10 year budget window. Other reforms produce smaller increases in giving along with smaller losses in revenue.

Marty Feldstein: Influential Advisor to Policymakers, Economists & Students

Marty Feldstein was the most influential U.S. economic policy adviser during the past half century. He was incredibly generous with his time, he pushed students to think about the economic intuition of their ideas. The teaching of sensible economics stands the course of time, and Marty was a steadfast defender of it.