We present budgetary and economic estimates for President Trump's proposed corporate income tax rate reduction from 21 percent to 20 percent.
President Trump’s Proposed Capital Gains and Dividend Tax Cut
PWBM estimates that reducing the top preferential rates on capital gains and dividends from 20 percent to 15 percent will cost $98.6 billion dollars over the ten year budget window. This tax cut will only benefit tax units in the top 5 percent of the income distribution, with 75 percent of the benefit accruing to those in the top 0.1 percent of the income distribution. Please refer to our analysis of the estimate for more information.
Forgiveness of Deferred Payroll Taxes
We estimate the budgetary and distributional effects of permanently forgiving the September to December 2020 payroll tax deferral under President Trump's August executive order. We project that this forgiveness would cost $122 billion dollars.
Presidential Candidate Joe Biden’s Proposed Child Tax Credit Expansion
Presidential candidate Joe Biden recently announced a proposal to temporarily expand the Child Tax Credit (CTC). We find that this proposal would cost $110 billion if implemented solely for calendar year 2021 and would cost $1.4 trillion over ten years if extended permanently. While higher income households are more likely to have qualifying children and would see larger average tax cuts ($1160 for the 90-95th percentile), lower income groups would see the largest relative benefit, with after-tax incomes increasing by 9 percent for the bottom quintile. Refer to our analysis of the estimate for more information.
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. Please see our analysis of the estimate for more information on the proposals.
Business Taxation in the Biden Tax Plan
We 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.
Recovery Rebates in the CARES Act: Update
The Coronavirus Aid, Relief and Economic Security (CARES) Act would provide families with emergency “recovery rebates”. The bill would provide individuals with an advance refundable credit worth $1,200 ($2,400 for married couples) plus $500 for qualifying dependent children. These payments would begin to phase out starting at $75,000 in AGI ($150,000 for married couples and $112,500 for heads of household). Advance payments would be sent based on taxpayers' 2018 or 2019 AGI if available; for taxpayers who qualify with previous years' AGI but would not with 2020 AGI, no repayment is required. PWBM projects that the rebates would cost $285 billion. (Note: this estimate reflects PWBM's updated understanding of the bill's legislative language regarding advance payments; an earlier version of the estimate can be found here.)
Charitable Deduction in the CARES Act
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.
Economic Assistance Payments in the Take Responsibility for Workers and Families Act
Take Responsibility for Workers and Families Act would provide families with emergency “economic assistance payments”. The House's version of the bill as of Monday, March 23rd 2020 would provide individuals with an advance refundable credit worth $1,500 ($2,500 for married couples) plus $1,500 for qualifying dependent children. These payments would begin to phase out starting at $75,000 in AGI ($150,000 for married couples and $112,500 for heads of household). PWBM projects that the rebates would cost $400 billion.
Recovery Rebates in the CARES Act
The Coronavirus Aid, Relief and Economic Security (CARES) Act would provide families with emergency “recovery rebates”. The bill would provide individuals with an advance refundable credit worth $1,200 ($2,400 for married couples) plus $500 for qualifying dependent children. These payments would begin to phase out starting at $75,000 in AGI ($150,000 for married couples and $112,500 for heads of household). PWBM projects that the rebates would cost $272 billion. (Note: this estimate was updated on 3/27/20 to correct a small modeling error.)
Options for Emergency Lump-Sum Cash Payments in Response to Coronavirus
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.
President Trump’s Payroll Tax Holiday
In response to the economic effects of the coronavirus, President Trump has proposed a payroll tax holiday that would temporarily eliminate all Social Security and Medicare payroll taxes through December 31st, 2020. We estimate the budgetary, distributional and economic effects if the holiday were run from April 1 through December 31, 2020. Updated on March 17, 2020 to include two scenarios for how the employer side of the tax cut would be distributed: either to the full benefit of business owners and corporate equity holders (“profits rise”) or to the full benefit of workers (“wages rise”).
The Updated Biden Tax Plan
We estimate the budgetary, distributional and economic effects over the 10-year budget window (2021 - 2030) of Presidential Candidate and Former Vice President Joe Biden's updated tax plan. Detailed summaries of each proposal can be found in our analysis of this estimate and our analysis of the previous version of his plan.
The Biden Tax Plan
We estimate the budgetary, distributional and economic effects over the 10-year budget window (2021 - 2030) of Former Vice President Joe Biden's tax plan, which raises taxes on high-income households through ten specific proposals, united around the common theme of raising taxes on capital income. Detailed summaries of each proposal can be found in our analysis of the estimate.
Senator Bernie Sanders' Wealth Tax
We estimate the budgetary and economic effects over the 10-year budget window (2021 - 2030) of Senator Bernie Sanders proposal for a graduated wealth tax starting at 1 percent tax on married couples’ net worth above $32 million, 2 percent tax on net worth from $50 to $250 million, 3 percent tax from $250 to $500 million, 4 percent tax from $500 million to $1 billion, 5 percent tax from $1 to $2.5 billion, 6 percent tax from $2.5 to $5 billion, 7 percent from $5 to $10 billion, and 8 percent tax on wealth over $10 billion. For unmarried individuals, the net worth cutoffs for these brackets are halved.
Senator Bernie Sanders' Estate Tax
We estimate the budgetary effects over the 10-year budget window (2021 - 2030) of Senator Bernie Sanders’ estate tax proposal to lower the exemption to $3.5 million for singles and $7 million for married couples as well as create four new brackets: estate values between $3.5 - $10 million are taxed at 45 percent; estate values between $10 - $50 million, at 50 percent; estate values between $50 million - $1 billion, at 55 percent; and, estate values above $1 billion, at 77 percent.
Senator Michael Bennet’s “The Real Deal” Tax Plan
We estimate the budgetary effects of five major tax proposals included in Senator Michael Bennet’s “The Real Deal” tax plan over the 10-year budget window (2020 - 2029).
Senator Elizabeth Warren’s Wealth Tax
We estimate the budgetary and economic effects of Senator Elizabeth Warren's proposal for a wealth tax equal to 2 percent of net worth above $50 million and 6 percent of net worth above $1 billion, which is enacted on January 1st, 2021.
Middle-Bracket Rate Cut
We estimate the budgetary, distributional, and economic effects (relative to current law) of lowering the marginal tax rate for the current 22 percent individual income tax bracket to 15 percent, beginning in tax year 2020. We consider a scenario in which this rate is permanently lowered and a scenario in which it is allowed to revert to 25 percent beginning in tax year 2026, as scheduled under current law.
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.