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Brief, Tax Policy, Economic Growth
Penn Wharton Budget Model
Senator Elizabeth Warren’s Wealth Tax: ...

  • 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.

Senator Elizabeth Warren’s Wealth Tax: Budgetary and Economic Effects
Blog Post, Tax Policy
Penn Wharton Budget Model
The Revenue-Maximizing Capital Gains Tax Rate: ...

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.

Blog Post, Tax Policy, Economic Growth
Penn Wharton Budget Model
Policy Options: Increase Tax Rates on Capital ...

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.

Blog Post, Tax Policy, Economic Growth
Penn Wharton Budget Model
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.

Blog Post, Tax Policy, Economic Growth
Penn Wharton Budget Model
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.

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PWBM Analysis of the Biden Platform

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PWBM Analysis of 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.

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Penn Wharton Budget Model COVID-19 Tracker

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The Penn Wharton Budget Model COVID-19 Tracker provides daily, real-time estimates of economic activity and of the evolution of the COVID-19 pandemic at the state level.

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The Increasing Mortality Gap by Education: Differences by Race and Gender

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Additional education is associated with similar reductions in mortality rates for men and women—in 2016, for example, men and women with high school degrees had mortality rates 16 percent and 14 percent lower, respectively, than those without degrees. That same year, however, the mortality advantage of completing a high school degree was 18 percentage points higher for White people than for Black people.

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The Increasing Mortality Gap by Education

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Over the last two decades, a mortality gap has opened up across education levels. For those born after 1950, each additional level of educational attainment is associated with at least an 18 percent lower mortality rate.

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Business Taxation in the Biden Tax Plan

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We use PWBM’s new dynamic model enhancement of the business sector to 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.

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Short-Term Economic Effects of the Trump $1 Trillion Infrastructure Plan

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We estimate that the anticipated Trump administration bill to invest $1 trillion in infrastructure would increase GDP up to $720 billion through June 2022.

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The Diminishing Effect of Physical Encounters on Coronavirus Transmission

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We estimate that the effect of physical encounters on coronavirus transmission has fallen over time, suggesting that people have adapted their behavior in accordance with social distancing best practices. Whether reopenings cause additional outbreaks will depend on the continuation of these behavior changes.

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The Impact of the Coronavirus Pandemic on Social Security’s Finances

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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.

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The Long-Run Fiscal and Economic Effects of the CARES Act

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PWBM estimates that the CARES Act increases GDP by about 5 percent in 2020 while lowering GDP by 0.2 percent in 2030.

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Coronavirus Policy Response Simulator: Health and Economic Effects of State Reopenings

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Using an integrated, interdisciplinary modeling approach, this simulator forecasts the state-level health and economic effects of reopening businesses and relaxing stay-at-home orders. This simulator will be updated regularly as new data arrive.

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The Precarious Position of Pennsylvania Healthcare Providers

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We report results from a survey of Pennsylvania physicians, finding that more than half report large decreases in hours worked for staff in their workplaces and 44 percent anticipate their income to decrease by more than half. We estimate PA doctors could lose $6 billion in income during 2020 Q3, with 45 percent of those in private practice anticipating shutting down within the next six months.

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Short-Term Economic Effects of a “Phase 4” Infrastructure Response to Coronavirus

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We estimate that a large infrastructure bill would increase GDP by no more than $360 billion per year for 2020 and 2021. Short-run GDP expansion from new infrastructure spending is limited by available projects and likely social distancing measures, and so states could not absorb more than $300 billion per year in new federal aid over the next two years.

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Short-Run Economic Effects of the CARES Act

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Short-Run Economic Effects of the CARES Act

  • Without the CARES Act, PWBM projects that U.S. GDP would have fallen at an annualized rate of 37 percent in 2020 Q2, with the unemployment rate reaching 12 percent by 2020 Q3.

  • PWBM estimates that the CARES Act will dampen the short-term decline in GDP to a 30 percent annualized rate in 2020 Q2, with the unemployment rate reaching 11 percent by 2020 Q3.

  • We project that the CARES Act will produce around 1.5 million additional jobs by 2020 Q3 and increase GDP by $812 billion over the next two years.

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Small Business and Coronavirus Relief

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In an attempt to prevent and reverse layoffs due to coronavirus, the recently-passed CARES Act established a new lending program targeted at businesses with 500 or fewer employees. These businesses account for 99.7 percent of all firms, 47.3 percent of employment, 40.7 percent of annual payroll, and about one-third of the growth in employment and wages. These businesses also account for 60 percent of employment in the leisure and hospitality sector, which has been disproportionately harmed by the pandemic’s effects.

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New Charitable Deduction in the CARES Act: Budgetary and Distributional Analysis

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The CARES Act establishes a new, temporary charitable deduction (limited to $300) in tax year 2020 for taxpayers who claim the standard deduction. PWBM projects that this provision would cost about $2 billion and would have little effect on total donations. More than half (53 percent) of the benefit would accrue to families in the 60th to 90th percentiles of the income distribution.

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Lasting Macroeconomic Impacts of the Coronavirus Crisis, Absent Fiscal Policy Response

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We estimate the lasting macroeconomic effects of the anticipated recession due to coronavirus, as the initial shock leads to lower federal revenue and higher debt. If the economy recovers the year after a deep recession ("V shape"), we project that federal debt will be 3.2 percent higher and GDP will be 0.3 percent lower by 2030. If the recovery occurs over two additional years (“U shape”), federal debt rises by 5.9 percent and GDP falls by 0.6 percent lower by 2030. Barring future fiscal policy to reduce debt, so-called “potential GDP” will, therefore, be permanently lower due to the coronavirus.

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Recession Simulator

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This simulation tool uses the experience of the Great Recession of 2007-2009 as a template to simulate key economic indicators during a recession beginning in March, 2020.

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Continuation of Low Oil Prices Would Hinder Investment and Growth in 2020

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If oil prices remain at current levels through the end of 2020, we estimate that growth in business investment will be 1.9 percentage points lower and growth in GDP will be 0.25 percentage points lower in 2020.

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The Demographics of the Coronavirus Crisis: Living Arrangements of “Leisure and Hospitality” Workers

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In a previous post, we presented some of the demographic, income, and geographic characteristics of leisure and hospitality workers, who have been disproportionately harmed by the economic impact of the pandemic. We expand on that analysis here with other characteristics that might be important for policy, showing that leisure and hospitality workers tend to live in cities and are more likely to rent, rather than own their homes.

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Options for Emergency Lump-Sum Cash Payments in Response to Coronavirus: Budgetary and Distributional Analysis

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We present budgetary and distributional estimates for three potential versions of the lump-sum payment that President Trump announced earlier today. All three options increase the after-tax income of low income households the most. However, higher-income households have more children on average and would receive larger cash payments unless additional adjustments are made.

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