About 30 percent of students who first attend two-year community college are from families with incomes above the median income for students attending four-year colleges. Moreover, upwards of one-fifth of top students from relatively small and large high schools first attend a two-year institution.
Inheritances by Age and Income Group
Households in the top 5 percent of the income distribution receive inheritances between 4 to 12 times larger than households in the bottom 80 percent, depending on the exact definition of inheritance used.
Projections of Global Intangible Low-Taxed Income: A Validation Exercise
Under current law, PWBM projects that U.S. multinationals will report a cumulative $3.6 trillion in Global Intangible Low-Taxed Income (GILTI) between 2022 and 2031. Data released in July 2021 by the Internal Revenue Service for the 2018 tax year provides the first opportunity for a more extensive validation of PWBM’s model of U.S. multinationals’ tax returns. PWBM projects 2018 GILTI within 5.3 percent of the IRS value, suggesting a very good model fit.
Explainer: Capital Crowd Out Effects of Government Debt
Government spending redirects real resources in the economy and can crowd out private capital formation. An additional $1 trillion debt this year could decrease GDP by as much as 0.28 percent in 2050.
Explainer: Economic Effects of Infrastructure Investment
Public infrastructure investment boosts the productivity of private capital and labor, leading to higher output, but this positive effect can be offset if the investment is financed with additional government borrowing. PWBM estimates that an illustrative 10-year, $2 trillion public investment plan will raise public capital by 4.6 percent but lower private capital by 0.8 percent in 2040, with a net zero effect on GDP in 2040.
COVID-19 School Closures: Long-run Macroeconomic effects
PWBM estimates that the learning loss from school closures reduced GDP by 3.6 percent in 2050. Extending the 2021-22 school year by one month would cost about $75 billion nationally but would limit the reduction in GDP to 3.1 percent. This smaller reduction in GDP produces a net present value gain of $1.2 trillion over the next three decades, equal to about a $16 return for each $1 invested in extending the 2021-22 school year.
Revenue Effects of President Biden’s Capital Gains Tax Increase
PWBM estimates that raising the top statutory rate on capital gains to 39.6 percent would decrease revenue by $33 billion over fiscal years 2022-2031. If stepped-up basis were eliminated—as proposed in President Biden’s campaign plan—then raising the top rate to 39.6 percent would instead raise $113 billion over 2022-2031.
Incentive Effects of the Romney and Biden/Neal Child Tax Credit Proposals
This post compares effective marginal tax rates (EMTRs) under the Family Security Act proposed by Sen. Romney and the Child Tax Credit (CTC) expansion proposed by Rep. Neal and President Biden. Married families with children and less than $45,000 in income would face EMTRs 4.4 percentage points higher under the Romney proposal and 6 percentage points higher under the Biden/Neal proposal.
Startups and Job Creation in the COVID-19 Economy
As of mid-November, there have been 700,000 more business applications in 2020 than at the same point in 2019, especially concentrated in pandemic-affected industries such as online retail. Accounting for this change in industry composition, we project that the 600,000 additional applications in the first three quarters of 2020 will result in 27,000 more employer businesses formed by Q3 2021 and about 120,000 additional jobs.
How Are Capital Gains and Dividends Taxed?
This post is part of a series that explains tax concepts. The highest 1 percent of earners are responsible for 71 percent of capital gains realizations. President Trump has proposed lowering the top rate on income from capital gains and dividends, while former Vice President Joe Biden has proposed increasing the top rate for taxpayers with more than $1 million in income.
Decline of Globalism: Capital Flows Update
Using more recent data on international capital flows, we find that the “effective openness” of the U.S. economy has decreased to 31.5 percent openness for private capital flows and 33.3 percent U.S. debt take-up by foreigners. This decline is in line with our prediction from last year’s posts on the effect of tariffs.
The Increasing Mortality Gap by Education: Differences by Race and Gender
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.
The Increasing Mortality Gap by Education
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.
Business Taxation in the Biden Tax Plan
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.
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.
The Diminishing Effect of Physical Encounters on Coronavirus Transmission
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.
The Long-Run Fiscal and Economic Effects of the CARES Act
PWBM estimates that the CARES Act increases GDP by about 5 percent in 2020 while lowering GDP by 0.2 percent in 2030.
The Precarious Position of Pennsylvania Healthcare Providers
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.
Short-Term Economic Effects of a “Phase 4” Infrastructure Response to Coronavirus
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.
Small Business and Coronavirus Relief
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.