PWBM’s new interactive tax policy tool allows users to explore different ways of raising taxes on high-income households—a common theme in the policy platforms of several of the 2020 presidential candidates. Users can build their own tax and spending plan from among 18 specific policy options—with 575 possible combinations—to see the total budgetary and economic consequences of their selected policies.
Video: PWBM's Stylized Medicare For All Model
Diane Lim, Director of Outreach and Senior Advisor at PWBM, and Felix Reichling, PWBM Senior Economist, discuss our new integrated health, budget, and economic model and a stylized analysis of universal Medicare.
Health Insurance Policy: 2020 Presidential Election State Indicator Map
PWBM’s interactive state-level map shows insurance indicators for each state that relate to health care policy. These data-based indicators can inform debates about 2020 Presidential campaign proposals for changes to health care policy. We show insurance rates for those who are unemployed, not in the workforce, employed, retirees and children. We also examine the cost of health care premiums, per enrollee spending on Medicare, state health care spending, infant mortality and life expectancy. These indicators imply that the impact of any proposed changes to health insurance policy on a state will depend on labor market conditions and the age distribution of that state.
Health Insurance Policy Map: Indicators of the Economic Impact on Each State
PWBM’s new interactive health insurance policy map allows you to see how health insurance coverage, costs and outcomes differ across states.
States with lower income and lower employment rates tend to also have lower health insurance coverage and broad measures of health outcomes.
These differences imply that proposed changes to health insurance policies, including those proposed by presidential candidates in the 2020 election, will affect each state differently.
Senator Sanders’ Medicare for All (S.1129): An Integrated Analysis
Under current law, we recently projected that the percent of the population without medical insurance will more than double over the next 40 years, growing from around 10 percent today to over 27 percent by 2060. Under Sanders’ Medicare for All, the uninsured rate would essentially fall to zero by design.
We project that the Sanders’ Medicare for All would improve population health by 2060, reduce the share of the population that is seriously ill from 15 percent to 13 percent, increase life expectancy by 2 years, grow the population 3 percent, and increase worker productivity.
Taken literally, Sanders’ plan lacks a financing mechanism, which by long-standing CBO and PWBM convention implies deficit financing. Under deficit financing, we project that the Medicare for All Act would reduce GDP by 24 percent by 2060, despite large efficiency gains from lower overhead and reimbursement costs.
As a presidential candidate, Senator Sanders, however, has stated his intent to also increase taxes, although he has not specified the actual tax changes tied to Medicare for All. Accordingly, we also analyze two alternative financing mechanisms that mostly finance benefits received by workers. With premium financing, where most workers pay the same insurance premium (subsidized for lower-income workers)—similar to private insurance with no risk adjustments—we project that GDP increases slightly by 0.2 percent by 2060. With payroll tax financing, where workers with higher wages pay more, GDP falls by 15 percent.
We also provide various robustness checks to key model assumptions and plan design. For example, without the expansion of plan benefits to include long-term care or dental, but still including the elimination of most deductibles while covering all workers, GDP increases by 12 percent under premium financing. These results indicate that Medicare for All could be designed in a way that boosts economic growth.
Medicare for All: Comparison of Financing Options
We analyze a stylized mandatory single payer system (“Medicare for All” or “M4A”) system that provides the same benefits currently available under Medicare to the working-age population. This brief lays the foundation for future analysis of plans that expand Medicare benefits and coverage while also seeking additional cost savings.
We project that under current law, the percent of the population without medical insurance will more than double over the next 40 years, growing from around 10 percent today to over 27 percent by 2060.
We project that a shift to a mandatory single-payer system (Medicare for All) increases life expectancy by almost 2 years, grows the population size by 3 percent, and increases worker productivity through improved health, before macroeconomic feedback effects.
The choice of funding mechanism, however, is critical for macroeconomic performance. We project that financing M4A with a premium that is independent of a worker’s labor income would increase GDP by about 16 percent by 2060 through a combination of cost savings and productivity increases. In contrast, financing M4A with a new payroll tax that is proportional to a worker’s labor income would reduce GDP by roughly 3 percent, whereas deficit financing would reduce GDP by almost 15 percent by 2060.
Explaining “Unexplained Weakness” in Corporate Income Tax Receipts
Recent revisions to estimates of corporate profits may explain the unanswered question of why corporate income tax receipts have underperformed CBO estimates in recent years.
Senator Bernie Sanders' Wealth Tax: Budgetary and Economic Effects
Senator Bernie Sanders has proposed a graduated wealth tax starting at 1 percent of net worth above $32 million and climbing to 8 percent on net worth above $10 billion, which his presidential campaign has reported as raising $4.35 trillion over 10 years.
PWBM estimates that the proposal would raise about $3.3 trillion over fiscal years 2021-2030, not including macroeconomic effects. Including macroeconomic effects, PWBM estimates that the proposal would raise about $2.8 trillion over the same period.
PWBM projects that the proposal would reduce GDP by 1.1 percent in 2050. Average hourly wages in the economy in 2050, including wages earned by households not directly subject to the wealth tax, would fall by 1.0 percent due to the reduction in private capital
The Biden Tax Plan: Budgetary, Distributional, and Economic Effects
Former Vice President Joe Biden has proposed a plan to raise taxes on high-income households, which the Biden presidential campaign estimates would raise $3.2 trillion over 10 years. PWBM projects that this plan would raise between $2.3 trillion (including macroeconomic effects) and $2.6 trillion (not including macroeconomic effects) over fiscal years 2021-2030.
We project that more than half of the tax change falls on the top 0.1 percent of the income distribution, corresponding to an average tax increase of more than $1 million per taxpayer and a 14 percent reduction in their after-tax income. For all groups outside of the top 5 percent, average after-tax income decreases by less than 1 percent.
PWBM projects that this plan would have little impact on the aggregate economy, decreasing GDP by 0.1 percent by 2030 and increasing GDP by 0.1 percent by 2050.
Senator Bernie Sanders' Estate Tax: Budgetary Effects
Senator Bernie Sanders has proposed expanding the federal estate tax by lowering the exemption to $3.5 million for singles and $7 million for married couples as well as creating four new brackets with marginal rates up to 77 percent.
Not including macroeconomic effects, PWBM projects that this plan would raise about $267 billion in additional revenue over fiscal years 2020 - 2029.
PWBM projects that this plan would increase the percentage of decedents that would face any estate tax liability to about 0.5 percent in 2030.
Senator Michael Bennet’s “The Real Deal” Tax Plan: Budgetary Effects
We project that five major tax proposals included in Senator Michael Bennet’s “The Real Deal” would raise over $4.5 trillion dollars over the 10-year budget window (2020 - 2029) on a conventional basis before economic feedback effects.
Policy Options: Raising the Social Security Taxable Maximum
We estimate the budgetary, economic and distributional effects of raising the Social Security taxable maximum to $300,000 starting on January 1st, 2021. We project that it would raise $1.2 trillion of additional revenue on a conventional basis over the 10-year budget window and lower GDP 1.7 percent by 2050. Families in the top 10 percent of the income distribution would bear 93 percent of the overall burden of this tax increase.
Senator Elizabeth Warren’s Wealth Tax: Budgetary and Economic Effects
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.
Video Interview on PWBM's Analysis of Senator Elizabeth Warren’s Wealth Tax
Diane Lim, Senior Advisor at PWBM, and Richard Prisinzano, PWBM's Director of Policy Analysis, discuss our analysis of Senator Elizabeth Warren's wealth tax proposal released December 12, 2019.
To read the full analysis, please visit: whr.tn/PWBM-Warren-Wealth-Tax.
Video directed and edited by Kody Carmody.
Policy Options: Eliminate Itemized Deductions
We estimate the budgetary, economic and distributional effects of eliminating all Schedule-A itemized deductions starting on January 1st, 2021. We project that it would raise about $2.1 trillion of additional revenue on a conventional basis over the 10-year budget window and increase GDP by 2.3 percent by 2050. Families in the top 10 percent of the income distribution would bear 75 percent of the overall burden of this tax increase.
The Revenue-Maximizing Capital Gains Tax Rate: With and Without Stepped-up Basis at Death
Under current law, PWBM estimates that a 33% capital gains tax rate maximizes revenue, but this rate increases to 42% if stepped-up cost basis at death were eliminated.
Policy Options: Increase Tax Rates on Capital Gains & Dividends
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.
Policy Options: A 1% Value-Added Tax
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.
Policy Options: A Carbon Tax of $30 per ton
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.
Social Security Projections: Competing Baselines
The Social Security Trust Fund is projected to be depleted between 2032 - 2035, depending on various assumptions.
Upon Trust Fund depletion, Social Security’s “payable” benefits--corresponding to a precise “current law” definition and based on annual payroll taxes collected in each year-- will equal between 70 - 75 percent of the “scheduled” benefits, based on the statutory formulas currently used to determine benefit levels (“current policy”).
Since Social Security’s financial projections typically extend beyond the depletion date, a modeling assumption must be made for benefit payments (“payable” or “scheduled,” “current law” or “current policy”) after Trust Fund depletion when projecting the impact of potential Social Security reforms on the economy. This decision plays a major role in projections of different potential reforms on the economy.