President Biden bills its massive $ 1.8 trillion spending proposal as a one-off opportunity that US economy, but new analysis released this week shows that long-term growth is due to a number of VAT Hikes.
The latest initiative, called the American Families Plan, would dramatically expand the government-funded social safety net by creating a universal pre-kindergarten and free community college, and providing a range of new tax credits for low- and middle-income families.
It would be paid by nearly doubling the capital gains tax rate from 20% to 39.6%, raising the top income rate to 39.6%, and closing a loophole known as a “tiered” base that lowers the tax on hereditary wealth.
But the tax changes included in the family proposal would actually lower GDP, the broadest measure of the goods and services produced in the nation, by 0.4% in the long run, according to new Results from the tax foundation, a non-partisan group.
The proposal would generate around $ 661 billion in new revenue over the next decade – but that would be offset by the proposed $ 998 billion in expanded tax credits, according to the Tax Foundation.
The tax changes would ultimately reduce revenue on a conventional basis by about $ 337 billion without taking into account the new money raised by fighting tax fraud (Biden suggested topping up the IRS budget and tax enforcement as part of the move to reinforce). National debt is already well on its way to hitting $ 30 trillion this year as government spending was unprecedented during the coronavirus pandemic.
Overall, Biden’s spending plan would cost the economy an estimated 64,000 full-time jobs and shrink wages by about 0.4%.
The proposal – the second tax and spending plan released by Biden this month as part of its “Build Back Better” agenda – is already a steep hill to be passed, despite the Democrats’ control of both houses of Congress.
Many moderate members of the president’s own party have suggested that $ 4 trillion in new spending is too much and have questioned whether the proposed tax hikes could harm the economy as it recovers from the coronavirus pandemic .
Republicans have already spread the proposal and criticized the price; the expansion of the social safety net; the lack of spending on traditional infrastructure; and the proposed tax increases for wealthy Americans and businesses. Senate Minority Leader Mitch McConnell, R-Ky., Recently predicted that no GOP Senator would support the measures.
The analysis could provide new fodder for these critics as the negotiations on Capitol Hill continue to advance.