Former Vice President Joe Biden’s tax plan – which aims to hike taxes on high-income households – would raise burdens substantially on the wealthiest Americans without doing much to boost overall economic growth, a new study found.
Continue Reading Below
According to an analysis from the University of Pennsylvania's Wharton School Budget Model, Biden’s plan – characterized as modest compared to some of his 2020 rivals – would place the heaviest burden on the top 0.1 percent – corresponding to an average tax increase of more than $1 million per taxpayer. That would mean a 14 percent reduction in this group’s average after-tax income.
Overall, however, while Biden’s campaign estimates that his proposal would raise $3.2 trillion over the course of a decade, Penn Wharton researchers estimate it would only raise between $2.3 trillion and $2.6 trillion. That’s at least $600 billion less than what Biden is aiming for.
It would also have a negligible effect on GDP and the overall economy. In fact, the study estimates it would decrease economic growth by 0.1 percent by 2030, increasing it by the same amount through 2050.
“In terms of stimulating the economy, it’s pretty neutral,” Penn Wharton Budget Model Director of Policy Analysis, Rich Prisinzano, told FOX Business. “Going out to 2050, it’s a wash.”
On the plus side, researchers predict Biden’s plan would reduce federal deficits and increase investment. On the other hand, it would like discourage labor and savings.
Among the key provisions included in the tax plan are eliminating the stepped-up in basis provision when taxing capital gains, raising the top income rate on income above $510,000 to 39.6 percent (from 37 percent), taxing capital gains at the same rates as ordinary income, raising the corporate tax rate, repealing the $10,000 cap on state and local tax deductions, among others.
The largest revenue generator, according to Penn Wharton’s analysis, would be raising the corporate tax rate.
Former CKE Restaurants CEO Andy Puzder told FOX Business in December that while the plan – including its various tax increases – may help Biden in the Democratic primary, it will likely hurt him in the general election.
“He may be on the right path in the primary, but in the general election this is a killer,” Puzder said.
Still, when compared with proposals from some of his 2020 Democratic rivals, Biden’s tax plan is notably less aggressive.
“It’s pretty moderate, it’s stuff we’ve seen before,” Prisinzano said.
Biden said he plans to use the revenue generated by his tax increase to invest in higher education, health care, reducing carbon emissions and revamping the nation’s infrastructure.