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.
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.
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.
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.
PWBM estimates that President Biden’s FY2025 budget proposal would reduce primary deficits by $1.7 trillion over the 2025-2034 budget window. Accounting for economic feedback effects, GDP falls by 0.8 percent relative to current law in 2034. By 2054, debt falls by 5.4 percent and GDP declines by 1.3 percent relative to current law.
We analyze the budgetary and economic effects of three very different illustrative policy bundles that reduce federal budget deficits over time without shrinking the economy relative to current law with rising debt. The results also demonstrate how federal debt falls short of measuring the true fiscal burden being shifted to future generations.
Debt ceiling debates would become less frequent if Congress adopted fiscal measures that limited the growth of federal government debt relative to the size of the economy. Without changes in fiscal policy, we project that the debt-to-GDP ratio will grow from 100 percent in 2024 to 190 percent in 2050. Contrary to conventional thinking, there exists a wide range of policy options that can reduce the growth of debt while growing the economy.
PWBM estimates that President Biden’s new Medicare proposal would increase the solvency of the Medicare trust fund from the year 2028 to 2053. However, a significant share of that increase comes from redirecting existing (current law) revenue to the trust fund. Another portion comes from unspecific expenditure reductions that lack the details required to score. Counting only new income without unspecified expenditure reductions, we project, as an illustrative alternative, that the HI trust fund would remain solvent until 2037.
PWBM estimates that the Senate-passed version of the Inflation Reduction Act would reduce non-interest cumulative deficits by $264 billion over the budget window. The impact on inflation is statistically indistinguishable from zero. GDP falls slightly within the first decade while increasing slightly by 2050. Most, but not all, of the tax increases fall on higher income households.
PWBM and CBO find an almost identical impact of the Inflation Reduction Act of 2022 (“IRA”) on the budget, with small differences stemming from the timing of the corporate minimum tax revenue. The impact on inflation is statistically indistinguishable from zero for either estimate.
PWBM estimates that the Inflation Reduction Act would reduce non-interest cumulative deficits by $248 billion over the budget window with no impact on GDP in 2031. The impact on inflation is statistically indistinguishable from zero. An illustrative scenario is also presented where Affordable Care Act subsidies are made permanent. Under this illustrative alternative, the 10-year deficit reduction estimate falls to $89 billion.
We project that President Biden’s FY2023 Budget, taken as a whole, would reduce debt and grow the economy by 0.4 percent over time, with two major components of the Budget---"Build Back Better” and “New Provisions”---working in opposite directions.
PWBM estimates that Medicaid’s inflation adjusted expenditures on Long Term Care services will increase from $130 billion in 2020 (0.62 percent of GDP) to $179 billion in 2030 (0.71 percent of GDP). We project that Medicaid expenditures on Nursing Home and Home Health will increase 4.7 percent and 6.9 percent per year above inflation through 2030, respectively.
This brief examines different approaches to removing the capital gains “lock-in effect” within a realization-based tax framework. We estimate that this change would produce between $115 billion and $357 billion in additional tax revenue over the next 10 years, depending on the exact design.
PWBM estimates that auto-enrolling into a Medicare Advantage (MA) plan those who age into Medicare and fail to sign up for Medicare Fee-For-Service (FFS) or another MA plan would increase enrollment in the MA program by 1.4 million people in 2032 and increase federal outlays by $189 billion over the 2022-32 period. If we assume that in response to such a policy change people would lose the incentive to enroll in Medicare FFS and instead get automatically enrolled into a MA plan, enrollment would increase by 6.8 million people in 2032 and outlays would increase by $269 billion over the 2022-32 period.
PWBM projects that the spending and taxes in the Build Back Better Act (H.R. 5376), as written, would add up to 0.2 percentage points to inflation over the next two years and reduce inflation by similar amounts later in the decade. As an illustrative alternative, if temporary major spending provisions were made permanent, the bill would add up to a third of a percentage point to near-term inflation and have a negligible impact on inflation later in the decade.
PWBM estimates that H.R. 5376, the Build Back Better Act, would increase spending by $2.1 trillion over the 10-year budget window while increasing revenue by $1.8 trillion, for a 10-year deficit of $274 billion. By 2050, the proposal would decrease GDP by 0.2 percent, relative to current law.
Drafting a budget from the August 2021 Senate reconciliation framework that satisfies the Senate rules of reconciliation (“Byrd Rule”) will require a decrease in new outlays or a large increase in revenues (or both) after the standard 10-year budget window.
One such potential reduction in spending would allow the new non-healthcare related discretionary spending provisions to expire after 2031.
With this reduced spending in 2031, we project that the reconciliation package will decrease GDP by 4.0 percent in 2050. Without this spending decrease (and where the Byrd Rule is not satisfied), we project a 4.8 percent fall in GDP in 2050.
We analyze a combination of net revenue raisers consistent with the requirements released by the Senate Budget Committee on August 9th, 2021, for budget reconciliation.
PWBM estimates that President Biden’s FY2022 budget proposal would increase spending by $6.1 trillion and increase revenue by $3.9 trillion over the 2022-2031 budget window. By 2050, we project that the President’s budget proposals would decrease public debt by 5.1 percent and decrease GDP by 1.5 percent relative to current law.
This brief analyzes the impact on health insurance premiums, out-of-pocket spending, and the economy for the healthcare proposal from Daniel Evan McGary as part of the PWBM Democratizing the Budget Contest.
The Biden healthcare plan focuses on expanding access and affordability of insurance and decreasing prescription drug prices. We estimate that by 2030, relative to current law, the Biden plan would decrease the uninsurance rate from 10 percent to 6 percent, decrease private insurance premiums by 23 percent and out-of-pocket spending by 16 percent, and decrease the percent of the population that forgoes medical care from 7 percent to 4 percent. The Biden healthcare plan would increase net spending by $352 billion over ten years but would reduce debt by 4.5 percent over that period due to dynamic growth effects.
PWBM uses dynamic distributional analysis to evaluate the effects of the Biden platform on different age and income groups. We find that working-age individuals in the bottom 40 percent of taxable income benefit the most due to expanded health insurance, increases in housing subsidies, and lower cost of prescriptions in the Biden platform, while young, high-income individuals and wealthy retirees see net losses due to tax increases and lower returns on their savings.
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.
