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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.

Tax Policy

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Senator Elizabeth Warren’s Wealth Tax: Budgetary and Economic Effects

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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.

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Video Interview on PWBM's Analysis of Senator Elizabeth Warren’s Wealth Tax

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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.

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Policy Options: Eliminate Itemized Deductions

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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.

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The Revenue-Maximizing Capital Gains Tax Rate: With and Without Stepped-up Basis at Death

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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.

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Policy Options: Increase Tax Rates on Capital Gains & Dividends

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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.

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Policy Options: A 1% Value-Added Tax

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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.

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Policy Options: A Carbon Tax of $30 per ton

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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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Charitable Donations Fall After 2017 Tax Reform Meeting PWBM Expectations

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Forbes’ senior contributor Kelly Phillips Erb wrote about the sharp fall in charitable contributions claimed by taxpayers in 2018. Recent data from the Internal Revenue Service (IRS) reveals that in 2018, charitable deductions claimed by taxpayers fell by $37 billion compared to 2017. Erb cites PWBM research, which projected a 5.1 percent reduction in total charitable giving due to the TCJA.

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Payroll Tax Holiday: Budgetary, Economic, and Distributional Effects

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We estimate that a one-year “payroll tax holiday” would cost the federal government between $141 and $151 billion over the standard budget window and increase GDP by 0.3 percent in 2020, with effects eventually turning slightly negative over time with higher deficits.

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Policymakers Cite PWBM Estimates About Indexing Capital Gains to Inflation

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On July 12, 2019, Senator Sherrod Brown (D-OH) and Ron Wyden (D-OR) wrote a letter citing PWBM to the Steve Mnuchin, Secretary of the Treasury, to reject a plan to change tax law so that capital gains would be adjusted for inflation. The law change would cut taxes paid on the sale of assets such as stocks, real estate, and other investments. The

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Differential Tax Rates Create Opportunities for Tax Avoidance

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On June 7, Hill staffers, fiscal experts, and PWBM gathered to discuss the federal revenue loss created by tax avoidance. The U.S. has different tax rates for different income streams, thus there are opportunities for individuals and businesses to reduce their tax bills by recharacterizing income to pay a lower rate.

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The White House's Plan for Indexing Capital Gains to Inflation

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Bloomberg’s Saleha Mohsin reports the Trump administration’s plan to index capital gains to inflation. Citing PWBM’s analysis, Mohsin highlights that indexing capital gains will disproportionately benefit those with high incomes. 

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Policy Options to Increase Charitable Giving Using Tax Incentives

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By substantially expanding the standard deduction, the Tax Cuts and Jobs Act reduced the incentive to make charitable contributions. We make use of data on non-tax itemizers to examine several potential policies designed to increase tax incentives for charitable giving. In particular, we project that a non-refundable credit for charitable contributions for filers who don’t itemize would expand giving by $208 billion (5.2 percent) and reduce tax revenue by $267 billion (0.6 percent) over the 10 year budget window. Other reforms produce smaller increases in giving along with smaller losses in revenue.

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PWBM Projections In-Line with Official Government Estimates

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In the Congressional Research Service’s report on the economic effects of the 2017 tax bill, Senior Specialist in Economic Policy Jane Gravelle and Specialist in Public Finance Donald Marples analyzed the effects of the Tax Cuts and Jobs Act (TCJA) on output and growth.

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Federal Debt Still Matters

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Lower interest rates since 2008 have reduced the cost of federal debt per dollar relative to the period before 2008. However, PWBM projects that the sheer size of federal debt will reach 190 percent of GDP by 2050 under present law. Even with low borrowing rates, stabilizing the debt-to-GDP level at its current value could increase GDP in 2050 by one to three times more than the projections we previously provided for the 2017 Tax Cuts and Jobs Act.

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Tariff’s Projected to Raise Prices for Americans

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The New York Times’ Jim Tankersley cites PWBM in an explanation of how Trump's tariffs erase the benefits of the current tax cuts. In particular, Tankersley finds that the benefits of Trump's tax cuts to the lower and middle classes will likely unwind as a result of his tariffs on goods from China, Mexico, and Europe.

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Seven U.S. Economic Models Project Rapid Growth of Federal Debt

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At the National Tax Association Spring Symposium, PWBM participated in a roundtable with other economic modelers. All modelers showed the results of cutting Social Security benefits by one-third in 2031. All models found that even with a benefit cut, by mid-century the U.S. still has a sizable debt-to-GDP ratio.

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The Expansion of the EITC Across States

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An interactive map shows the history of state-level expansion of the Earned Income Tax Credit (EITC) across the United States. States with Democrat governments and Democrat-Republican mixed governments are more likely to expand state-level EITC programs.

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Gig Economy Workers Face Tax Hurdles

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Knowledge@Wharton invited Senior Economist at PWBM, Richard Prisinzano, on as a guest speaker on April 12, 2019, as well as Christine Speidel of Villanova University’s Federal Tax Clinic , to discuss discuss personal taxes, focusing on gig economy workers.

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First Tax Day Under the Tax Cuts and Jobs Act

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CNN reported on the first Tax Day under the Tax Cuts and Jobs Act. Lydia Depillis highlighted key economic effects of the 2017’s Tax Cuts and Jobs Act.

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